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HP's Earnings Rise 8% in Quarter, Below Estimates

May 16, 1997|From Times Wire Services

Hewlett-Packard Co. said Thursday that its fiscal second-quarter earnings rose 8%, less than analysts had expected, as slower sales of computers and printers hampered growth.

The No. 2 computer maker said a tough comparison with a strong quarter last year, the effect of a stronger dollar and slowing in certain markets constrained growth rates.

Industry analysts also cited weaker-than-expected growth in Hewlett-Packard's inkjet printer business and a decline in orders and revenue for its LaserJet printers. The Palo Alto-based firm said U.S. orders fell 2% in the quarter, while orders outside the United States rose 7%.

Net earnings for the quarter were $784 million, or 75 cents a share, compared with $723 million, or 69 cents, in the year-ago period. Those results were restated to reflect a 2-for-1 stock split completed in July.

Hewlett-Packard's results came in below industry analysts' estimates of 80 to 81 cents.

Revenue for the quarter ended April 30 was $10.3 billion, up from $9.9 billion in last year's second quarter.

Hewlett-Packard Chairman Lewis Platt said the company managed to generate good profit margins despite the slowing order growth.

"Our cost-of-sales result was excellent, and we continued to make progress in managing our operating assets and in generating cash," he said in a statement.

"We're disappointed, however, with order and revenue growth," Platt said.

The results were released after the stock market's close. Trading in HP shares was halted at the close, with the stock up $2.25 at $58.875 on the New York Stock Exchange, just shy of the day's high of $59 and the stock's all-time trading high of $60.

Analysts said the disappointing earnings could touch off selling in some technology stocks today, but probably not to the extent of last July, when a profit warning by HP sent a chill through the sector.

Revenue in the United States was $4.4 billion, an increase of 1% from the year-ago quarter, while revenue from outside the U.S. rose 7% to $5.9 billion.

Orders for the quarter totaled $10.4 billion, a 3% rise from a year ago, when orders had jumped 24% from the year-earlier period. Without the effects of currency exchange rates, the company's order growth this quarter would have been about 3 percentage points higher, Hewlett-Packard said.

In the United States, orders declined 2% to $4.6 billion, while orders abroad rose 7% to $5.8 billion.

David Wu, an analyst at ABN AMRO Chicago Corp., said the most marked weakness in orders was in the United States. "You can't blame the dollar for that," he said.

Analysts said there are signs that the printer market, which Hewlett-Packard dominates, has slowed.

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