HP Q1 profit flat as revenue rises

One week after firing Chairman and Chief Executive Officer (CEO) Carly Fiorina, Hewlett-Packard on Wednesday reported earnings and revenue numbers that surpassed Wall Street expectations.

The Palo Alto, California-based computer maker's revenue for the quarter, which ended Jan. 31, was US$21.5 billion, up 10 percent from US$19.5 billion its year-earlier quarter, but profit remained flat. HP reported net earnings of US$943 million for the quarter, up slightly from the US$936 million it reported in 2004.

Earnings per share were US$0.32, up from the year-earlier figure of US$0.30, when calculated using generally accepted accounting principles (GAAP). Before charges, the company's operating profit was US$1.3 billion with earnings per share of US$0.37, which were US$0.03 above expectations.

There is "work to be done to improve our profitability," said a written statement attributed to Robert Wayman, the company's chief financial officer, who is also serving as interim CEO.

HP executives declined to comment on how their company's work at hiring a new CEO has progressed since Fiorina was let go last Wednesday.

Fiorina isn't the only HP employee to be laid off by HP recently. The company absorbed US$60 million in restructuring costs during the first quarter as it laid off more than 600 employees, Wayman said during a conference call with analysts. Another US$140 million in restructuring costs will be incurred in the second quarter, he added, without saying how many layoffs this would entail.

"It will still be heavily in TSG," he said, referring to the company's Technology Solutions Group (TSG), which sells the company's enterprise hardware, software and services offerings.

Wall Street had been expecting revenue of just under US$21 billion and earnings per share of US$0.34, according to a survey of analysts by Thomson First Call.

TSG continued to be a drag on profitability. The business unit's operating profit was US$312 million for the quarter, down from the year-earlier figure of US$365 million.

HP earned just US$71 million in profit from its Enterprise Storage and Servers business, which took in US$4 billion in revenue, and the software group lost US$40 million on US$240 million in sales. HP Services did better, earning US$281 million in profit on US$3.8 billion in revenue.

During the next quarter, the company will focus on returning its struggling storage business to profitability with a updating of its Enterprise Virtual Array line of storage devices, expected in May, said Ann Livermore executive vice president of TSG. "We're certainly not where we want to be yet in storage," she said.

Personal computers remained a low-margin business for HP, earning US$147 million on revenue of US$6.9 billion -- the unit's most profitable quarter since 2000, according to HP.

As usual, the company's imaging and printing group remained the cash cow, bringing in US$932 million in profit on revenue of US$6.1 billion.

HP expects second-quarter results to be in the same range as its first-quarter figures, with revenue in the range of US$21.2 billion to US$21.6 billion and earnings per share in the range of US$0.35 to US$0.37.

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