HP's Net Income Up 30 Percent

Hewlett-Packard's first-quarter profits soared 30 percent to $936 million, boosted in part by a strong showing from its personal systems group.

For the three months ended Jan. 31, HP reported net income of 31 cents per share, up from 24 cents a share, or $721 million, in the same period last year. Excluding special items, it earned $1.08 billion, or 35 cents per share, up from $877 million, or 29 cents per share, a year earlier.

First-quarter revenue was $19.51 billion, up 9.2 percent from $17.88 billion in the first quarter of 2003.

During a conference call, HP chairman and CEO Carly Fiorina characterized the first quarter as "solid," but acknowledged that there's "pricing pressure" from IBM and others in the IT consulting market. She said corporate customers remained hesitant about spending on information technology. "We said we expected a steady recovery in IT spending, not an explosive one," Fiorina said. "Everything we've seen since then reaffirms our view of the IT market."

Personal systems was a bright spot for HP, posting $6.2 billion in revenue, a 20 percent increase from the year-ago quarter, and an operating profit of $62 million, compared with $22 million a year earlier. HP said the group's profit was the highest since the Compaq merger in May 2002.Despite weakness in Unix servers, HP's Enterprise Systems Group, which includes both hardware and software, had revenue of $3.9 billion, 5 percent growth year over year, and net income of $108 million after posting a loss of $82 million in the year-ago quarter.

HP said Unix revenue declined 13 percent from a year earlier, reflecting intense pricing pressure. Alpha revenue declined 32 percent from a year earlier, and HP 9000 server revenue was flat.

Services revenue was up 6 percent to $3.2 billion, but profits were down to $258 million from $339 million for the year-earlier period. Fiorina said services experienced intense pricing pressure in customer support and weakness in consulting and integration--but managed services experienced 27 percent growth.

Imaging and printing had sales of $5.9 billion and net income of $968 million, compared with sales of $5.6 billion and earnings of $911 million a year earlier.

HP said it expects second-quarter revenue of $19.2 billion to $19.6 billion and earnings per share of approximately 34 cents.0