HP reports 14% profit rise, even as revenue dips

HP, considered a bellwether in the technology sector, reported 8.4 percent drop in revenue in the quarter.

The results
For the period ended Oct. 31, HP reported an income of $2.41 billion as compared to $2.11 billion from the year-earlier period. Revenue slumped to $30.77 billion from $33.6 billion.

Chief Executive Mark Hurd said the "economy remains challenging, but we see encouraging signs of recovery. We worked hard on our cost structure to emerge from this economic downturn more competitively positioned.

"Our portfolio is substantially stronger than when we entered the economic downturn."

The dismal performance by the company’s mainstay businesses, viz. PCs, servers, software and printers, was offset by gains mustered by its technology services.

The technology service set up was beefed up by the Palo Alto, California-based behemoth with the $13.9 billion acquisition of Electronic Data Systems last year.

Referring to the issue of costs, analyst Roger Kay of Endpoint Technologies Associates said, "Bravo on managing the bottom line so well. The only question is did (H-P executives) cut things they'll need to manage their level of business and grow, just to make their numbers?"

HP’s PC business
The Personal Computer division of HP accounts for close to 33 percent of the company’s revenue but barely 15 percent of its operating profit. The pressure on PC margins is increasing by the day, as PC makers aggresively cut prices to attract the cash-strapped consumers.

Little laptops called "netbooks" that are available in the market for just a few hundred dollars are only making it tougher for the PC manufacturers.

In the PC sector, HP has managed to break Dell's historic stronghold and has attained the numero uno position in sales of computers to large U.S. businesses.

Arc rival Dell reported a 54 percent drop in profits last week. Results for HP's personal computer business reveal that the company has increased its market share drastically.

Hurd said, “We feel as good about our portfolio and our market position as we ever have. So make no mistake about that. If you talked about our view of our competitive position, it just has never been stronger."

HP's personal-systems group that includes the PC business registered an 8 percent hike in shipments, even as it recorded a 12 percent decline in revenue to $9.9 billion.

Analyst Crawford Del Prete of International Data Corp. said, “That's the story of the PC business, where you've got precipitous price declines and great values for customers. H-P's got what you need in this business: scale, leading-edge design. But the problem is prices are so aggressive, it makes it difficult to generate revenue."