HP Earnings Seen Meeting Expectations

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Hewlett-Packard will announce fiscal first quarter numbers after the close of trading on Wednesday, giving the world a good look at the state of the venerable technology giant — and of the industry at large, considering HP’s bellwether roles in PCs, servers and its more recent ascendancy to a strong services position with the acquisition of EDS.

Though early expectations are that HP (NYSE: HPQ) will post another solid quarter, the real questions are what will be the bright spots in the company’s vast portfolio. For much of 2009, it was the services business pulling things along while the rest of the company’s business fell by double digits year-over-year.

Analysts surveyed by Thomson Reuters estimate HP will pull in about $29.96 billion, only a 4 percent gain over the $28.8 billion of last year. Earnings per share is expected to be in the $1.06 range, a 17 percent improvement over the $0.93 range from a year ago.

UBS analyst Arun Sharma has issued his own report and estimates, which are fairly close to the consensus figures from Thomson Reuters. He puts revenue at $29.95 billion and EPS at $1.05.

“We are expecting a solid quarter with upside potential to both our revenue and EPS estimates driven by PC share gains, servers, better than expected printer demand and continued benefits from EDS cost savings and overall operational efficiencies,” Sharma wrote.

The figures do not take into account the acquisition of 3Com, which was still pending as of the report’s writing. The European Union gave its blessing on Friday, allowing the $3 billion merger to go through.

Even without 3Com being factored into the equation, HP looks to be on solid ground.

The Personal Systems Group (desktops/laptops/netbooks) is expected to gain market share and probably do very well, especially in light of the IDC market share reportthat showed HP gaining ground. The unknown quantity at this time is how aggressive HP has been with sale prices.

The Imaging and Printing Group has taken some big hits, but Sharma expects a 2 percent year-over-year bump based on 7 percent hardware growth and flat growth in supplies. Sharma reports that some component tightness is limiting the ability of printer vendors to meet hardware demand and that channel supply inventories continue to be worked down. Once demand for components is met, that will help increase sales.

The Enterprise Storage and Servers group is expected to provide some good numbers, but Sharma did not elaborate on percentages or dollar amounts. He likewise declined to give any figures for HP’s Services business, but does expect it to yield good results.

“With integration of the EDS acquisition progressing well and ahead of initial plans, we believe HP’s value proposition is taking hold earlier than many had been expected and may be driving some share gains within the services market. From a cost perspective, we believe HP is continuing to benefit from cost cutting and incremental operational improvements related to the EDS deal that should again be beneficial to margins,” he wrote.

UBS expects HP to issue an outlook for the April 2010 quarter in line with analyst estimates. UBS estimates revenue of $28.6 billion and EPS of $1.02 while the Street projects revenue of $29.0 billion and $1.03 EPS.

Andy Patrizio is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.