Hewlett-Packard bucks technology gloom

By Steve Malone

Posted on 21 Nov 2002 at 10:46

Computer giant Hewlett-Packard surprised many analysts yesterday with better than expected results by announcing improved figures across its main business units of Imaging, Personal Systems and Enterprise.

The company reported a revenue increase of 9 per cent over the previous quarter quarter - $18.0bn, compared to $16.5bn although it is still a fraction less than the $18.2bn the combined Compaq and Hewlett Packard made a year ago. 'HP's revenue grew sequentially in every business and in every region. We are proud of our progress,' said Carly Fiorina, HP chairman and chief executive officer.

Much of the improvement was due to cost savings the company made by combining the operations of Compaq and Hewlett Packard. The company said that cost savings for the second half of 2002 were $651m, 30 per cent above plan. The company completed 12,500 net workforce reductions in the half, saving $257m.

The star performer, as usual, was the 'Imaging' division with revenues up 18 per cent on the quarter and 12 per cent year-over-year to $5.6bn. In truth HP would have been in serious trouble if Imaging had not had a bumper quarter having recently launch around 50 new products across the range of printers and scanners.

Much attention was paid to the loss making personal computer division which has been locked in battle with Dell Computer. Savings resulting from the merger and better inventory management helped to slash the operating loss by 56 per cent although total revenues at $5.1bn were up 6 per cent on the quarter and down 6 per cent year over year on a combined company basis. The consumer PC revenue, although fighting back, remained in the doldrums with revenues up 16 per cent on the quarter but down 13 per cent from Q4 2001. Business PCs did a little better with revenue increasing 3 per cent over Q3 but staying flat over the year.

The toughest market at the moment remains the Enterprise segment with HP continuing to struggle against the background lowered of IT budgets and reduced investment. Revenues of $4.1bn were still 5 per cent down on a year ago but merger related savings once again came to the rescue and helped towards cutting the losses to $152m from $422m in the previous quarter.

'We delivered solid results in a tough market.' Declared Fiorina. 'The HP team is executing, customers are responding and we're beginning to deliver on the promise of the merger. We feel good about our trajectory.'

Hewlett-Packard is slashing the amount of red ink across its divisions but there is only so far a company can go by cutting costs as the result of the merger. At some point, analysts, shareholders and customers will be looking for profits not only from its strongholds in printers but also from its PCs and Enterprise systems.