In the midst of a multi-year turnaround effort intended to revive
growth, the Silicon Valley company is trying to reduce its reliance
on personal computers and move toward computing equipment and
networking gear for enterprises.
On Thursday, the company broke its losing streak in its PC-focused
personal system group with a 4 percent gain in revenue. Chief
Executive Office Meg Whitman told analysts that the company saw
corporations and agencies beginning to replace ageing computers in
the quarter, while Microsoft's decision to soon end support for its
Windows XP operating system also prompted PC upgrades.
Business at its enterprise group, the lynchpin of HP's strategy to
transform itself into an IBM-like provider of enterprise computing
services, edged 1 percent higher as server sales fared better than
analysts had expected. Chief Executive Officer Meg Whitman said
growth in revenue and operating margins in that crucial division was
"possible," provided demand from enterprises holds up.
Whitman, who took the helm of the HP more than a year ago, has said
she expects revenue to stabilize in 2014, with some areas of growth
for the company.
On Thursday, Whitman stuck to that outlook and told Reuters she was
upbeat on HP's European business as the developed part of that
region stabilized, and she said she saw strength in emerging markets
like India and Mexico. She added that HP's business in China stayed
largely flat, better than competitors had fared.
"Pleased with the progress, more work to be done," Whitman
summarized for Reuters in an interview.
"It's a battle. It's a knife fight every single day out there, but
we feel we've got the right ammunition," she told analysts later.
On Thursday, HP raised the lower end of its full-year earnings
outlook slightly, to $3.60 to $3.75 versus a previous forecast for
$3.55 to $3.75.
For the first quarter, HP posted revenue of $28.2 billion, down
slightly from $28.4 billion a year earlier and beating expectations
for about $27.2 billion.
"They're in a strong position to do well this year, but it also
shows the continued challenges in their enterprise business, their
software business," said Shannon Cross of Cross Research. "They're
clearly not done in terms of improving."
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Investors have been cautious on the outlook for computing companies
after IBM posted disappointing results, in part because of slowing
corporate and emerging markets demand, and a backlash against U.S.
corporations in China over revelations of U.S. spying activity
Cisco Systems Inc, a rival in networking equipment, forecast a 6
percent to 8 percent decline in revenue this quarter.
HP has battled IBM as well as now-private Dell and China's Lenovo
in trying to win business from enterprises migrating to the cloud,
or remote computing services. Whitman said Lenovo's imminent
purchase of IBM's low-end server division presented an opportunity
for HP to try and win market share, especially in the near term,
given that customers tended to avoid uncertainty about a supplier's
"We have a near-term opportunity to gain share in our server
business. We're all over it with our channel partners," she said.
But "in the long term, Lenovo is going to be a powerful competitor."
The company posted a 16 percent rise net earnings of $1.4 billion in
the first quarter, compared to $1.2 billion a year ago. Excluding
items, it earned 90 cents a share, better than the 84 cents analysts
had expected, according to Thomson Reuters I/B/E/S.
Shares of HP gained a penny to $30.20 after hours, from a close of
$30.19 on the New York Stock Exchange.
"HP is in a stronger position today than we've been in quite some
time, Whitman said in a statement.
"Rest assured, we're not taking our foot off the pedal," she told
analysts later on a conference call. "We have a lot of work ahead of
(Reporting by Edwin Chan; editing by
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