HP server group sees profit in Q4

HP's troubled Enterprise Storage and Servers group has bounced back to profitability during its most recent financial quarter, and the company overall revenue rose 8 per cent to $US21.4 billion.

HP's net earnings for its fourth fiscal quarter, which included $136 million in after-tax adjustments, were $US1.2 billion, or $US0.41 per share.

This exceeded analyst expectations of $US0.37 per share compiled by Thomson First Call. HP's total revenues were also slightly ahead of Thomson's estimates, which had been $US21.1 billion, according to a survey of 18 financial analysts.

Excluding the adjustments, HP's net earnings were $US1.1 billion.

The Enterprise Storage and Servers group reported an operating profit of $US107 million and a 7 per cent increase in revenue. Several key executives in that group were fired last quarter following a botched order processing system migration. The group recorded $US4.1 billion in revenue for the quarter.

Problems with the order processing system, which affected sales of HP's ProLiant servers, had been resolved, HP's chairman and chief executive officer, Carly Fiorina, said.

HP shipped a record number of ProLiant servers during the period, with unit shipments up 18 per cent from the fourth quarter of 2003, she said. The company reversed declines in sales of its NonStop fault-tolerant systems, but sales of the company's Alpha servers, which HP is in the process of phasing out of the market, dropped 27 per cent year-over-year.

Fourth-quarter revenue from NonStop servers was up 13 per cent and up 8 per cent for HP-UX systems compared to last year, Fiorina said. NonStop sales were down 25 per cent year-over-year during the third quarter.

Sales of the company's Itanium-based Integrity servers now made up 16 per cent of HP's high-end "business critical" server revenue, up from 5 per cent a year ago, Fiorina said.

Managed services continued to be a fast-growing component of HP's services business. This area grew at 35 per cent, year-over-year, fuelled by $US1.1 billion in services deals signed during the quarter with Nokia, Starwood Hotels & Resorts Worldwide and WestLB, Fiorina said.

HP Services reported a profit of $US367 million, with revenues up 13 per cent from the previous year to $US3.7 billion.

The company's Imaging and Printing Group reported a profit of $US1.1 billion on revenues of $US6.5 billion. HP sold 14 million printers during the quarter, but total revenue was up only 5 per cent from the year-ago quarter.

HP's storage division continued to struggle. Networked storage revenue was down 9 per cent compared to last year's fourth quarter, despite the introduction of a number of new storage products during the quarter, Fiorina said.

"Storage is a business with long sales lead times and it will take more than a quarter or two for us to achieve the results we expect," she said.

HP's Personal Systems Group, which sells desktop systems and notebooks, eked out an operating profit of $US78 million on sales of $US6.5 billion during the quarter, its strongest performance since 2000, according to HP.

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