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HP Computer Segment Sales Rise 8%, Profit Soars

Palo Alto, Calif. — In the first full quarter under the guidance of Mark Hurd, president/CEO, Hewlett-Packard reported an 8.2 percent rise in fiscal third-quarter revenue for its flagship personal systems group, hitting $6.4 billion, up from $5.9 billion, with unit shipments — of what is primarily computers — increasing 14 percent.

The personal systems segment recorded operating profit of $163 million in the third quarter, or 2.6 percent of total revenue, up from $23 million in the same three months last year.

Although desktop computer revenue declined 3 percent year-over-year in the quarter ended July 31, notebook revenue soared 21 percent. Desktops in the third quarter accounted for $3.3 billion in sales, compared with $3.4 billion in the same period a year earlier, while notebooks jumped to $2.4 billion in the quarter, up from a year-ago $2 billion.

HP’s imaging and printing group came in with a 5 percent year-on-year increase in revenue, reaching $5.9 billion, up from $5.6 billion. However, the segment saw operating profit drop 13 percent to $771 million in the quarter, from $836 million in the third quarter of the prior year.

Color laser unit shipments rose 31 percent in the three months year-on-year, while multifunction printer shipments increased 67 percent in the same period. Supplies revenue grew 6 percent.

“We executed well in the third quarter with double-digit revenue growth, solid margin improvements in key segments and strong cash flow,” said Hurd. “I’m encouraged by what we have achieved to date, and we are focused on driving further performance improvements.”

Hurd, who was hired from NCR last February to replace long-time CEO Carly Fiorina, has spent the past six months running HP according to his own vision. His plans to eliminate 14,400 jobs were announced this summer, and, at the same time, Hurd said he could save the company $1.9 billion annually through restructuring.

Third-quarter consolidated HP revenue jumped 10 percent, hitting $20.8 billion, compared with last year’s $18.9 billion, with the company reporting higher sales quarter-over-quarter in its key computers, printers and services businesses.

In the three months, consolidated net income fell to $73 million from a year-earlier $586 million. However, the 88 percent shortfall was due to one-time tax adjustments for the repatriation of $14.5 billion in foreign earnings. The company said it would use some of the repatriated cash to make acquisitions and buy its own stock.

Operating margin, excluding one-time items, increased to 5.7 percent in the three months, from 4.5 percent in the same period last year. The improvement was much the result of the company’s job reduction effort and restructuring during the quarter.

During the quarter, revenue in the Americas grew 8 percent, reaching $9 billion.

For the nine months, personal systems group revenue reached $19.6 billion from a year-ago $18.1 billion, while operating earnings for the segment in the period climbed to $457 million, from $128 million in the same quarter in 2004.

Consolidated revenue hit $63.8 billion in the first nine months, compared with $58.5 billion last year. Net income came in at nearly $2 billion, down from $2.4 billion in the third quarter of the prior year.