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HP Profits Jump 9%

Hewlett-Packard reports positive second-quarter financials, but new CEO Mark Hurd says there's much more to do--and he hints at more layoffs.

Craig Zarley

May 17, 2005

2 Min Read

Hewlett-Packard's second-quarter earnings jumped 9 percent over the year-earlier period during the first quarter under new President and CEO Mark Hurd.

HP's net earnings reached $966 million, or 33 cents per share, for the quarter ended April 30, a 9 percent increase over the year earlier period when the company had profits of $884 million, or 29 cents per share.

Sales for the quarter reached $21.6 billion, up 7 percent over the $20.1 billion posted for the comparable 2004 quarter.

Excluding special items, such as workforce reduction expenses, HP earned $1.07 billion, or 37 cents per share, in the quarter.

Speaking during a press conference Tuesday, Hurd said he has spent 25 percent of his time on the job talking to customers and partners. The rest of his time has been spent talking to HP employees and reviewing each of HP's business units, he said.

Hurd said that his No. 1 priority is to "simplify the company." Still, during the earnings call and a follow up call with analysts and a subsequent press conference, Hurd made no specific mention of his channel strategy.

"HP had a solid quarter," Hurd said in a prepared statement. "We grew revenue 7 percent, [and] non-GAAP earnings rose 9 percent. Nevertheless, our overall performance leaves room for improvement in many of our businesses. We expect to provide details as soon as our plans are finalized that will move us toward that objective."

HP acknowledged that those plans include more layoffs. HP estimates that third-quarter revenue will be in the range of $20.3 billion to $20.7 billion, with non-GAAP earnings per share in the range of 29 cents to 31 cents. This excludes after-tax costs of some 3 cents per share from amortization of purchased intangible assets and some $100 million, or 3 cents per share, in workforce reductions, the company said.

HP's Imaging and Printing Group posted revenue of $6.4 billion, up 5 percent year over year. But operating profit slipped to $814 million, down from $952 million a year earlier.

Personal Systems Group revenue grew 6 percent to $6.4 billion and operating profit jumped to $147 million, up from $44 million in the comparable 2004 quarter.

Just prior to Hurd taking over as CEO in March, HP combined its imaging and PC group into a single unit.

Enterprise Storage and Servers reported revenue of $4.2 billion, up 6 percent over the prior-year period with operating profit of $184 million, compared to an operating profit of $119 million in the like 2004 quarter.

This story was updated at 7:14 PM EDT.

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