HP quadruples income for fourth quarter
- 17 November, 2006 17:20
Capping a year when it reclaimed the title of world's largest PC vendor despite a boardroom scandal, HP has reported net income of $US1.7 billion for the fourth quarter, more than four times its mark for that period last year.
HP listed earnings of $US0.60 per share for the quarter ending Oct. 31 on revenue of $US24.12 billion. HP recorded net revenue of $US24.6 billion. On a pro forma basis, which excludes certain one-time items, HP had earnings per share of $US0.68, beating by $US0.04 the consensus estimate from analysts polled by Thomson Financial.
For the fourth quarter last year, HP reported net income of just $US400 million, or $US0.14 a share on revenue of $US22.9 billion.
The strong quarter pushed HP to full year profits of $US6.2 billion, far above its 2005 mark of $US2.4 billion. The company reported full-year revenue of $US91.7 billion, beating analysts' expectations of $US91.23 billion and matching their earnings target of $US2.18 per share. Full year earnings last year were just $US0.82 per share.
All of HP's six business divisions reported operating profit in the fourth quarter and five of the six reported gains over the year-ago quarter.
But results were mixed in HP's Enterprise Storage and Servers division. Revenue rose 4 per cent to $US4.7 billion from the year ago quarter and operating profit rose to $US502 million or 10.7 per cent of revenue. But revenue grew by just 1 per cent for its storage products. Eleven per cent growth in HP's midrange EVA storage product line was offset by declines in HP's high-end storage arrays and its tape storage products.
"Our growth profile of our storage business is negatively impacted by our mix toward the declining tape market, " HP chairman and CEO, Mark Hurd, said. "We are not happy with our storage growth in the fourth quarter and we need to do a better job of driving top line momentum in the coming year."
Fourth quarter revenue, compared to the year-ago quarter, and operating margins for other divisions, are as follows:
-- Personal Systems Group: Revenue grew 10 per cent to $US7.8 billion; operating profit reached $US336 million or 4.3 per cent of revenue.
-- Imaging and Printing Systems: Revenue up 7 per cent to $US7.3 billion; operating profit of $US1.1 billion or 14.8 per cent.
-- Software: Revenue up 14 per cent to $US349 million; operating profit of $US60 million, or 17.2 per cent.
"This is the strongest quarter, we've had in a number of years," Hurd said.
A corporate restructuring program, which Hurd launched in July 2005 two months after he became CEO, was substantially completed, HP's chief financial officer, Robert Wayman, said. About 14,200 jobs had been eliminated at the company since then, although about another 1000 jobs would be eliminated in the first quarter of HP's 2007 fiscal year, Wayman said.
The latest earnings report comes just one day after ousted HP chairman, Patricia Dunn, made another court appearance in the HP board scandal case. Dunn pleaded not guilty in Santa Clara County Superior Court to four California state felony charges related to the company's investigation of leaks by HP directors to the news media. She is one of five people charged in connection with the case, in which false pretenses were allegedly used to gain access to private phone records.
Hurd maintains that the board scandal has had no impact on HP's business operations.
Despite that turmoil, the company has performed well in sales, passing its rival Dell to become the world's largest PC vendor. HP hadn't worn that crown for three years. Dell's fortunes continued to fall, as the company postponed its own earnings call in the wake of a formal investigation by the US Securities and Exchange Commission