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Robust Sales Help HP Exceed Forecasts

Technology: Firm posts 3.2% rise, delivering good news to investors for only second time in 11 quarters.

November 17, 1998|From Bloomberg News

Hewlett-Packard Co. said Monday that fiscal fourth-quarter earnings rose 3.2%, topping expectations, as the world's third-largest computer maker was helped by robust sales of printers and personal computers.

Profit before charges for the three months ended Oct. 31 rose to $832 million, or 79 cents a share, from $806 million, or 75 cents, a year ago. HP was expected to earn 74 cents, the average estimate of analysts polled by First Call Corp. Sales rose 3.7% to $12.2 billion from $11.8 billion.

The better-than-expected profit is only the second time in 11 quarters that HP hasn't disappointed investors, as it struggles to boost sales of its printers, computers and electronic test equipment amid competition and slower economic growth. HP was boosted by improved sales of home PCs and computer servers as it kept a lid on costs.

"The PC business has clearly turned," said analyst John Jones of Salomon Smith Barney, who had expected earnings of as much as 78 cents.

Still, HP remains cautious about fiscal 1999, citing weakness in Asian economies and signs of a slowdown in parts of Latin America.

HP shares rose 88 cents to close at $66.13 on the New York Stock Exchange. The shares fell as low as $65.81 after the earnings were released.

Palo Alto-based HP said sales of all computers rose 7% to $10.3 billion, and sales of Pavilion home PCs and mid-range NetServer systems were especially good. HP had struggled with bloated inventories earlier this year, forcing price cuts.

"We made great progress on inventory levels this quarter, with our PC business achieving outstanding results," said Bob Wayman, HP's chief financial officer.

Expenses were unchanged from a year ago and were 23.1% of revenue, down from 24% in the year-ago quarter and 24.6% in the third quarter.

In the fourth quarter, sales in Europe rose 15% to $4.2 billion, while Asia-Pacific sales fell 20%. Currency translations shaved 2 percentage points off revenue growth, HP said.

At a Glance

Other earnings, excluding one-time gains and charges unless noted:

* Ross Stores Inc., based in Newark, reported third-quarter net income of $28 million, or 59 cents per share, compared with $25.1 million, or 50 cents, a year ago. Sales rose 10% to $531 million, compared with $483 million a year ago.

* Lancaster-based Rexhall Industries Inc. reported third-quarter net income of $965,000, or 32 cents per share, compared with $329,000, or 11 cents, a year ago. Revenue rose to $18.5 million, versus $15.9 million a year ago.

* Woodland Hills-based Spatializer Audio Laboratories Inc. reported a third-quarter net loss of $1.1 million, or 5 cents per share, on revenue of $390,000, compared with a net loss of $661,435, or 3 cents, on revenue of $833,000 a year ago.

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