posts surprise revenue gain after PC sales jump
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[August 21, 2014]
By Edwin Chan
SAN FRANCISCO (Reuters) -
Hewlett-Packard Co posted a surprise increase in
quarterly revenue after sales from its personal computer
division climbed 12 percent, but a flat to declining
performance from its other units underscored the
company's uphill battle to revive growth.
HP sales rose a mere 1 percent to $27.6 billion in its fiscal third
quarter from $27.2 billion a year earlier. Wall Street analysts had
forecast a modest drop in revenue to $27.01 billion.
The Silicon Valley giant is undergoing a major overhaul aimed at
cutting costs and re-orienting itself toward higher-margin
businesses such as computing infrastructure. It's trying to reduce a
reliance on PCs and move toward servers, storage and networking for
enterprises - part of Chief Executive Officer Meg Whitman's effort
to return the sprawling company to growth.
Whitman credited personal computer demand for "coming back some" as
consumers and corporations upgraded ageing machines. She was pleased
with 2 percent growth in revenue to $6.9 billion at the Enterprise
Group, the company's second-largest business that deals in
networking, storage and servers.
"It's a turnaround in a declining business," Whitman said in an
interview. She singled out a 9 percent increase in sales of
industry-standard servers in particular, saying uncertainty around
Lenovo's acquisition of IBM Corp's low-end server unit helped steer
business to HP.
"We've been able to capitalize on that uncertainty and our win rates
are up against IBM," Whitman added.
She pegged Russia and China - countries whose relations with the
United States have come under strain - as weak spots for PC sales,
though Whitman said its Chinese business as a whole remained on
HP intends to remain rigorous on costs to try and boost
profitability. In May, it estimated another 11,000 to 16,000 more
jobs needed to be cut on top of 34,000 previously announced.
It narrowed its earnings forecast for the full year to $3.70 to
$3.74 per share, from $3.63 to $3.75. The company posted $1.7
billion or 89 cents per share of non-gaap diluted net earnings in
the third quarter, up 3 percent and in line with forecasts.
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Whitman said HP was assessing its $4 billion software business in
view of an industry migration toward Internet-based or cloud
software. And she said the company, with $4.9 billion in operating
company net cash at the end of the fiscal third quarter, could make
acquisitions if needed.
The company prefers to build its own capabilities and buying when it
cannot develop inhouse, Whitman told analysts on a conference call.
HP also remains committed to returning at least half its cash flow
to shareholders, via dividends and buybacks.
"We're in a position to make acquisitions the way we weren't over
the past year," she said.
Shares of the company dipped 0.8 percent to $34.84 after-hours. They
closed at $35.12 on the New York Stock Exchange.
(Reporting by Edwin Chan; Editing by Bernard Orr)
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