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HP Reports Profit on Cuts, Sales

May 21, 2003|Terril Yue Jones | Times Staff Writer

Hewlett-Packard Co. on Tuesday posted a strong profit for its fiscal second quarter thanks to aggressive cost cutting and strong sales of high-end computing systems to big customers.

The Palo Alto-based computer maker earned $659 million, or 22 cents a share, for the three months ended April 30, on $18 billion in sales. In the same period last year, before the company completed its acquisition of Compaq Computer Corp., HP earned $252 million, or 13 cents, on $10.6 billion in revenue.

HP's Enterprise Systems group, which designs and sells corporate computer networks, nearly broke even, reducing its loss by 92% from the first quarter to $7 million. Chief Executive Carly Fiorina has pledged to make the business unit profitable by the end of the year.

"It was remarkable how close they got this quarter," said Paul McGuckin, an analyst with Gartner Inc. "This part of the merger was the most difficult for HP and Compaq."

The two computer manufacturers merged last May, at the beginning of the third quarter.

Fiorina said the enterprise business probably would see "continued slight losses in the third quarter and solid profitability in the fourth quarter."

She highlighted the continuing tough competition with rivals IBM Corp. and Sun Microsystems Inc. in the server market and with Dell Computer Corp. in the PC business, noting that the lead in global shipments of personal computers has pingponged between HP and Dell for the last four quarters.

"Why should customers choose HP in servers over IBM or Sun, or choose HP in PCs over Dell?" McGuckin said.

Imaging and printing remained HP's profit center, earning an operating profit of $918 million. The firm did not provide net earnings for its business units. Chief Financial Officer Bob Wayman told analysts that HP was on track to finish its 2003 fiscal year with earnings of $1.20 a share.

HP shares, which gained 17 cents to $17.05 in regular trading on the New York Stock Exchange, climbed as high as $18.45 in after-hours trading after the earnings announcement.

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