HP posts strong Q3 earnings, credits solid PC sales

It reports revenue of $21.9B

Hewlett-Packard Co. posted better-than-expected financial results Wednesday that were buoyed by strong growth in the company's PC group.

Excluding certain charges, HP reported a profit of $1.7 billion, or 52 cents per share, on revenue of $21.9 billion for its fiscal third quarter, ended July 31. Analysts had been expecting earnings per share of 47 cents on revenue of $21.8 billion, according to Thomson Financial.

The company's Personal Systems Group saw revenue grow 8% year over year, with notebook sales jumping 14% and desktop PC sales up 5%. Operating profit for the group was up, too, totalling $275 million for the quarter. Last year, the group's profit was $163 million for the same period.

HP's results -- considered a bellwether for the industry -- come during a slowdown in PC sales growth and earnings warnings from companies such as Intel Corp., Advanced Micro Devices Inc. and Dell Inc.

Dell, which is due to announce results Thursday, has warned of lower profits for its most recent quarter because of "aggressive pricing and slow commercial sales worldwide."

Worldwide, PC sales grew by 9.7% year-over-year during the second quarter of 2006, a slowdown from 12.9% growth in the first three months of the year.

HP's other main lines of business did not fare as well as the Personal Systems Group. Revenue in the company's enterprise servers and storage business was up only 3%, thanks in part to declines in HP's PA-RISC and Alpha systems businesses.

The company's printer business grew by 5% but was hurt by a 3% slowdown in consumer hardware sales, HP said. However, the group remained highly profitable, earning $884 million on $6.2 billion in revenue.

HP Services revenue was up 1% year over year, totalling $3.9 billion, and software revenue was up 30%, totaling $318 million for the quarter.

Copyright © 2006 IDG Communications, Inc.

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