Hewlett-Packard shares rose the most in six years in New York trading after posting profit that beat analysts' estimates and forecasting growth in 2009, signalling that the personal-computer maker will withstand a global slump.
Fourth-quarter earnings were $US1.03 a share, excluding some costs, Hewlett-Packard said. That beat the $US1 average of projections compiled by Bloomberg. Profit in the next fiscal year will advance to between $US3.88 and $US4.03, with the midpoint of that range surpassing estimates.
The projections show that chief executive Mark Hurd's cost cuts have helped squeeze more out of sales, even as they're weighed down by the recession, said Toni Sacconaghi, an analyst at Sanford C. Bernstein.
That puts the world's biggest PC maker ahead of Cisco Systems, Intel and other technology companies dragged down by the slowdown.
"It's a validation of the fact that H-P is generally extremely well-positioned in a tougher economic environment versus its peers," said Sacconaghi, the top-ranked computer analyst by Institutional Investor magazine.
Hewlett-Packard climbed $US3.50, or 12%, to $US32.84 in New York Stock Exchange composite trading last night. The stock climbed as much as 15% earlier in the day, the most since November 2002.
"Our ability to execute in a challenging marketplace differentiates HP," Hurd said in a statement. The Palo Alto, California-based company plans to report full results November 24.
'Ray of sunshine'
Hewlett-Packard predicted first-quarter sales of $US32 billion to $US32.5 billion and profit of 93 cents to 95 cents. The forecast exceeded UBS's earnings estimates of 77 cents a share for the first quarter and $US3.26 for the year, prompting analyst Maynard Um to call the company "a ray of sunshine in the storm."
For the fiscal year ending in October 2009, Hewlett-Packard foresees sales of $US127.5 billion to $US130 billion.
Hewlett-Packard's shares have been pummelled since Goldman Sachs, Citigroup and Credit Suisse cut their estimates for global PC shipments next year. Intel spurred the moves last week when it slashed its sales forecast on "significantly weaker demand." Intel's chips are used in more than three-quarters of the world's computers.
Corporate technology spending will grow at less than half the pace initially predicted next year as financial clients pare orders, research firm IDC said this month. At least 19 US banks have failed this year, with the collapse of the sub-prime mortgage market triggering more than $US700 million in credit losses and asset writedowns.
Spending slump
Global technology spending probably will rise 2.6% in 2009, down from an earlier estimate of 5.9%, IDC said last week. Growth in the US probably will ebb to 0.9%, according to the researcher.
Hewlett-Packard led PC shipments in the most recent quarter, with 18% of the market, according to Gartner. Dell had 14%, the Stamford, Connecticut-based research firm said.
Hewlett-Packard's fourth-quarter sales, boosted by the acquisition of Electronic Data Systems in August, rose 19% to $US33.6 billion. Net income climbed to 84 cents a share from 81 cents a year earlier.
PC shipments account for about a third of revenue at Hewlett-Packard and about 15% of operating profit, Sacconaghi said. Corporate technology spending will grow at less than half the pace initially predicted next year as financial clients pare orders, IDC said this month.
New products
Hewlett-Packard has redesigned its notebooks, added mini- notebooks that sell for less than $US500, and leaned on its network of more than 80,000 retailers to buoy sales and maintain the market lead it retook from Dell in 2006.
"I consider the report to be a victory, given the current activity in the global economy," said Stanley Nabi, vice chairman of New York-based Silvercrest Asset Management Group, which owns almost 1 million Hewlett-Packard shares. "This shows they have a tight hold on their markets."
Without EDS, Hewlett-Packard's sales probably would have risen 5%, according to Tom Smith, an analyst at Standard & Poor's.
Hurd spent $US13.2 billion on EDS to expand its services business. In September, he said he would slice 24,600 jobs, or 7.5% of the combined workforce, to save $US1.8 billion a year. It was his biggest workforce reduction since taking charge.
"The bottom line is, despite worries about an economic slowdown, the company can still grow earnings," said Bill Kreher, an analyst with Edward Jones. He recommends buying the shares.
