Enterprise Sales Help HP's Cause

The computer and printer maker sees advances in servers, PCs and notebooks but is cautious about claiming victory over the downturn.

HP is seeing an increase in sales of its enterprise products, but is more guarded than its Silicon Valley-based brethren when it comes to announcing the end to the downturn.

The Palo Alto, Calif.-based computer and printer maker reported financial results for its second fiscal quarter, including record revenue of $20.1 billion, an increase of 12 percent year-over-year. The number is the highest in quarterly revenue for the first time in its history.

Net income jumped by 34 percent to $884 million (29 cents per share), compared to $659 million (22 cents per share) during the same, year-ago quarter. On a case-by-case basis, the company said revenue in Personal Systems grew 17 percent year-over-year; HP Services grew 15 percent; Imaging and Printing grew 11 percent; Enterprise Storage and Servers grew 8 percent; Software grew 23 percent.

Chairman and CEO Carly Fiorina said HP's success in the last three months was due to record revenue in PCs, enterprise hardware, software, services and imaging and printing.

"HP delivered a strong quarter with solid revenue gains and continued profitability across the portfolio. These results demonstrate that we are winning and growing across the portfolio in an intensely competitive market," Fiorina said in a statement.

Regionally, HP is doing well. Sales in the Americas grew 4 percent to $8.4 billion; Europe grew 17 percent to $8.3 billion; Asia Pacific grew 22 percent to $2.4 billion; and Japan grew 21 percent to $967 million.

But Fiorina remained cautious, suggesting that competition from IBM, Dell, and Sun Microsystems is a force to be acknowledged along with the strength of the recent sales.

"Customers are willing to buy, but are discriminating when it comes to pricing," Fiorina said during a conference call to investors. "We are holding our own despite the rhetoric and we're more focused than ever in leading in the market."

Part of the problem, according to Fiorina, is the software part of HP's "Adaptive Enterprise" utility computing/visualization/provisioning strategy. The company said seven acquisitions since July 2003 resulted in an operating loss of $49 million for the quarter. The other earnings sapper, HP said, is an agreement by its Canadian subsidiary to settle a contract dispute and reimburse the Government of Canada USD$105 million.

By comparison, Fiorina's contemporaries including Michael Dell, Cisco's John Chambers, IBM's Sam Palmisano and Intel's Craig Barrett have not only recorded record profits in the last three months, but all four men said their outlook for the near-term at least was very favorable.






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