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HP revenue beats estimates as PC maker bucks industry slump
[SAN FRANCISCO] HP reported revenue that beat analysts' estimates, with an industry-defying surge in personal-computer (PC) sales driving a fifth consecutive quarterly increase.
Sales at the world's biggest maker of PCs rose across all businesses and all regions in the fiscal fourth quarter.
While profit for the current period may fall slightly below analyst projections, the company raised by one cent its forecast for the fiscal year that started Nov 1.
Adjusted profit of 44 US cents in the three months through Oct 31 matched analyst predictions.
Chief executive officer Dion Weisler has spent much of the past year cutting costs, introducing new products and expanding the Palo Alto, California-based company's 3-D printer offerings.
Those efforts helped push revenue 11 per cent higher from a year earlier to US$13.9 billion, HP said Tuesday in a statement.
"The results give us confidence in the trajectory of our business," Mr Weisler said in a briefing.
"We feel good about the investment choices that are ahead of us. We believe that we can create significant value."
The company formerly known as Hewlett-Packard spun out its data centre, software and services as Hewlett Packard Enterprise in 2015, with the expectation that shareholders would benefit from those faster-growing, more lucrative businesses.
Yet shares in HP, which focuses on PCs and printers, have outperformed its more glamorous offspring, rising about 71 per cent to Hewlett Packard Enterprise's 47 per cent, by embracing higher-end products and producing revenue increases.
"HP is executing and gaining share in two categories that were largely left for dead by the industry," IDC analyst Crawford Del Prete said by email.
"At the same time they are innovating in new segments. Comparisons are going to get harder in the future, but the disciplined approach they are taking is not only working, it's providing for growth."
Chief financial officer Catherine Lesjak acknowledged in a conference call with analysts that the rapid growth rate of the past year may be hard to maintain.
"The compares are tougher, we know that," she said.
After two quarters of double-digit growth, analysts estimate HP revenue will increase less than three per cent in the first half of fiscal 2018. The shares fell about six per cent in extended trading after closing at a record US$22.46 in New York.
HP's PC shipments grew 4.4 per cent in the three months through September from the same period a year earlier, even as the rest of the industry endured a 3.6 per cent decline, researcher Gartner reported in October.
That made it the top-selling PC brand for the second consecutive quarter over Lenovo Group.
Sales in the personal systems group, which includes PCs, gained 13 per cent in HP's recent quarter, after rising 12 per cent in the previous period.
Pace of Spending
While HP's total costs rose about 10 per cent in the quarter, the increase was proportionately smaller than the jump in sales.
The spending is spread across "R&D, marketing and field-selling costs", Ms Lesjak said in the briefing.
Analysts estimated US$13.4 billion in fiscal fourth quarter sales, according to data compiled by Bloomberg. Net income increased to US$660 million, or 39 US cents a share, from US$492 million, or 28 US cents, a year earlier.
Profit, excluding some items, will be 40 US cents to 43 US cents a share in the fiscal first quarter, HP said. Analysts forecast 42 US cents a share.
A year ago, Mr Weisler announced plans to cut 3,000 to 4,000 jobs over three years, a move aimed at generating US$300 million in savings.
Printing revenue increased 7 per cent to US$4.88 billion. The division is expanding with the US$1 billion acquisition of Samsung Electronics' printer business - a deal that was completed at the start of November and that's meant to bolster HP's push into the market for larger office copiers.
That acquisition has prompted HP to raise its adjusted profit forecast for next year to US$1.75 to US$1.85 per share.
Nonetheless, the Samsung business is unlikely to contribute to growth until the second half of 2018, as HP invests in expansion and integration with the existing business, Ms Lesjak told analysts.
The Samsung unit generates a lower proportion of revenue from the more lucrative supply of printer cartridges than HP currently does, she said.