Hewlett-Packard's 25% Profit Jump Signals Tech Comeback

Tech giant Hewlett-Packard (HPQ) reported a 25% jump in profit Wednesday, beating Wall Street estimates, in the latest sign that consumers and companies are increasing spending on computer products. In optimistic guidance, the maker of computers and printers also raised its 2010 outlook, citing "accelerating" market activity. HP shares rose 1.4% in after-hours trading."HP is well-positioned to outperform the market," Mark Hurd, HP chairman and chief executive officer, said in a statement. "The strength of our portfolio, leaner cost structure and accelerating market momentum give us the confidence to raise our full-year outlook."

HP upped its earnings forecast for the full year to a range of $4.37 to $4.44 per share, excluding charges, up from its previous forecast $4.25 to $4.35 per share.

Optimistic Outlook

"The company is executing extremely well in a somewhat challenging environment," Shannon Cross, an analyst at Cross Research told Bloomberg. "HP is extremely well-positioned to benefit from an improved economy over the coming quarters."

HP is the world's largest manufacturer of personal computers and accessories such as printers, so the strong results offer further evidence that the technology sector is returning to life. Last year had been abysmal as consumers deferred purchases for most of the year, and companies basically halted new tech spending. HP reported strong PC and printer sales in the final holiday months of 2009, as consumers returned to the marketplace.

"The results look pretty strong," Kaufman Bros. analyst Shaw Wu toldThe Wall Street Journal. "Hewlett-Packard continues to execute in a tough macroeconomic environment."

Hurd told CNBC that the company's server business grew 27%, its PC business grew 20% and its printer business grew 16%. During a conference with analysts, sounded an optimistic note about he company's prospects. "I believe HP has the best and broadest portfolio in the industry," Hurd said. "We are No. 1 or No. 2 in virtually every area where we compete."

Corporate Refresh

While Hurd declined to say that the IT market has fully recovered, he said, "whatever the market hands to us, we'll do better." He said the company expects "a corporate refresh in the back half of the year," as business move to upgrade their systems after an extended period of staying on the sidelines.

HP's results were driven by strong international sales, which account for nearly two-thirds of the company's revenue, including a 26% sales increase in Asia. Revenue grew 9% in the Americas. But Hurd said the company is looking for better performance from the European market.

The company reported net income of $2.3 billion, or 96 cents per share, a significant jump from the $1.9 billion, or 75 cents per share the company posted one year ago. Excluding items certain items, the company reported earnings of $1.10 per share, beating the Street's average estimate of $1.06 per share. Revenue jumped 8% to $31.2 billion.

Shell Deal

Meanwhile, HP and global oil giant Shell this week announced a partnership to develop wireless technology that will better enable Shell to locate and evaluate underground oil and gas wells. The companies hope the partnership will improve the quality of "geophysical" data collection, a key component of energy exploration.

"These advances in technology to discover energy resources could transform the ability to pinpoint abundant new oil and gas reserves," Joe Eazor, senior vice president and general manager, HP Enterprise Services said in a statement. "HP is uniquely positioned to offer Shell a complete sensor system that delivers innovation to address key technical seismic challenges."

Mark Hurd has done an excellent job turning HP around over the last several years. As the economy recovers, the company is well poised to continue its legacy as a technology leader.
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