From Denys' favorite newspaper:
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Hewlett-Packard Rebounds to Beat Forecasts in Quarter

November 20, 2003
  By STEVE LOHR


The Hewlett-Packard Company supplied reassuring evidence
yesterday that its business was back on track when it
reported quarterly sales and profits that modestly
surpassed Wall Street's expectations.

The results for the company, whose main businesses are
making computers and printers, were closely watched because
it had slipped in the previous quarter, disappointing
analysts and raising fresh doubts about the wisdom of its
purchase of Compaq Computer in May 2002.

But in the quarter ended in October, Hewlett-Packard's
personal computer division and its business selling larger
data-serving computers both returned to profit, after
losing money the previous quarter. And the company's
printing business delivered another strong performance,
reporting more than $1 billion in operating profit,
two-thirds of the corporate total.

"It was pretty solid," said A. M. Sacconaghi, an analyst at
Sanford C. Bernstein & Company. "Every one of the
businesses was at or better than the level expected."

The chief executive, Carleton S. Fiorina, pointed to the
quarterly results as proof that her strategy was working.
"By any measure," she said, "we hit our stride and
demonstrated what the merger was all about."

Wall Street seemed to greet the report more as a sign of
encouraging progress than cause for celebration. The
company reported its results after the close of regular
trading. In after-hours trading, Hewlett-Packard shares
rose 55 cents, to $22.86, according to Instinet. During
regular trading, Hewlett-Packard increased 69 cents, to
$22.34 a share.

Despite improvement, Hewlett-Packard's personal computer
business was only slightly profitable in a quarter of
strong growth in sales. The personal computer industry
rebounded in the period, particularly in those areas where
Hewlett-Packard does well, like sales to consumers and
notebook PC's.

Revenue for the personal computer division rose 19 percent,
to $6 billion, as unit shipments increased 35 percent. But
the company had an operating profit of only $21 million.
That is certainly better than the loss of $56 million in
the previous quarter, and a loss of $68 million in the
quarter a year earlier. But hovering around break-even puts
Hewlett-Packard well behind Dell, which is consistently
profitable.

A large part of the strategy behind the Compaq merger was
that the combined company would have the size and scale to
make the computer businesses of the new Hewlett-Packard
healthy and solidly profitable. Clearly, the company has
further progress to make on that front.

In a conference call with analysts, Ms. Fiorina expressed
confidence that further profit improvement was coming as
Hewlett-Packard continues to sell more PC's, particularly
notebooks, that carry higher profit margins. She said the
PC industry was increasingly "a two-horse race" between
Dell and Hewlett-Packard, as most other PC makers were
losing money and market share. In the third quarter, she
noted, shipments of notebook computers rose 35 percent for
the industry as a whole, but 60 percent for
Hewlett-Packard.

The company's total revenue increased 10 percent, to $19.9
billion, as earnings per share rose 50 percent, to 36 cents
a share. The average forecast of analysts was sales of $19
billion and earnings of 35 cents a share, according to
Thomson First Call.

The enterprise systems division, which sells server
computers for corporate and government data centers,
reported an operating profit of $106 million on a 2 percent
increase in revenue to $4.1 billion. In the previous
quarter, the unit lost $70 million.

Revenue in the services business grew 5 percent, to $3.2
billion, and operating profit increased 9 percent, to $393
million. Services is a good business for Hewlett-Packard,
but a far smaller one than for its most comparable
competitor, I.B.M. In the conference call, Ms. Fiorina said
growth in services would come mainly from increasing sales
to its 700 largest corporate customers.

Sales in imaging and printing rose 11 percent, to $6.2
billion, and its operating profit increased 7 percent, to
just above $1 billion, a record.

http://www.nytimes.com/2003/11/20/technology/20hewlett.html?ex=1070335320&ei=1&en=8ab87f425011555f

Copyright 2003 The New York Times Company


--
Tom Brandt
Northtech Systems, Inc.
130 S. 1st Street, Suite 220
Ann Arbor, MI 48104-1343
http://www.northtech.com/

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