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HP Q1 PC Segment Sales Increase 2%

Palo Alto, Calif. – Driven by increases in PC and PDA revenue, Hewlett-Packard’s personal systems group recorded a 2 percent increase in revenue in the company’s fiscal first quarter, hitting $5.1 billion, up from $5 billion in the fourth quarter of last year.

New product introductions and normal seasonal sales were primary reasons for the segment’s revenue climb. However, notebook revenue dropped in the first quarter, compared with the previous three months.

HP, in releasing its financial results for the first quarter, ended Jan. 31, mainly compared results of its first three months to the preceding quarter, ended Oct. 31, stating that year-over-year numbers, prior to its merger with Compaq Computer, would not be helpful.

HP’s personal systems group also moved into the black in the first quarter, registering a $33 million operating profit, compared with a $68 million operating loss in the preceding quarter. The segment’s strong results for the period – with strong market acceptance of new Media Center PC, Tablet PC and iPAQ offerings – resulted in reinforcing company commitment to innovation, said HP.

Operating profit for PCs amounted to 0.6 percent of revenue in the first quarter, compared with a negative 1.4 percent in the fourth quarter of last year. The company attributed operating margin improvement for the last three months to re-engineered channel programs and competitive new product introductions, among others. Operating margin in the first quarter climbed to 4.9 percent, 250 basis points above the 2.4 percent reported in the fourth quarter of last year.

HP revenue in the Americas declined 7 percent in the first quarter, compared with the previous three months, down to $8.2 billion, or 46 percent of total revenue. The U.S. drop, as well as decreasing sales in Japan, were the key reasons for HP’s overall revenue decline in the first quarter, down 1 percent, to $17.9 billion, from $18 billion in the previous quarter. For the quarter, HP earned $721 million, compared with $390 million in the fourth quarter of last year.

Pre-merger sales, excluding Compaq, in the first quarter of last year hit $11.4 billion, on earnings of $484 million. Revenue would have been $19.6 billion, including Compaq.

‘HP is making good headway and continues to execute well,’ said Carly Fiorina, chairman/CEO. ‘The first quarter was our best overall profit performance since the merger, demonstrating there is significant leverage in our operating model.

‘We made good progress on cost structures, achieved sequential market share gains in each of our businesses and continued to improve gross margins. Our revenue shortfalls were largely confined to the U.S. market,’ she said.

HP, which completed its $19 billion merger with Compaq in May of last year, has benefited from current results, in that critical comments that the two companies would not easily mesh or that they could not generate the cost savings claimed in the pre-merger hype, have eased. The first quarter’s profit reached the high end of analyst expectations, while revenue fell short of expert forecasts.