Hewlett-Packard soon to usurp IBM’s title

Hardware giant Hewlett-Packard has reported a huge leap in its profits for its third quarter on Wednesday registering rather unexpected growth.

Not only is it making its rival Dell lose the competitive edge, but growing at the same gait will make it seize IBM’s title and become the largest technology company.

Hewlett-Packard boasted a huge growth in all the sectors from the printer group to the software group and in the quarter ended July 31, the profits and sales have exceeded the expectations of the analysts.

With a revenue rise of $21.9 billion, up by 5 percent or $1.1 billion from a year ago, most Hewlett-Packard executives think the company could manifest its dream to hold IBM’s long-held title this year.

The chief executive of Hewlett-Packard, Mark V. Hurd, said that revenue of $92.1 billion is expected for the year. Whereas, analysts are expecting IBM’s full-year revenue to be $89.9 billion.

Based on these calculations, Hewlett-Packard has already won the title.

The 2005 quarter was affected by a larger-than-normal provision for taxes of $960 million resulting from the company’s decision to admit $14.5 billion in cash from foreign earnings. In terms of operating income, the company reported a 65.4 percent advancement year over year.

The confidence displayed by Hewlett-Packard is what impressed analysts the most. Laura Conigliaro, an analyst, said that most of the company’s go out of the way to blame the economic environment or stumble on their own way sometimes, but Hewlett-Packard has indulged in neither of the two things.

Since the time Mr. Hurd took up the job with this top company, it has been reporting profits in its net income every quarter and has been growing leaps and bounds.

The company also announced about its largest repurchase ever. It would buy back $6 billion in stock, representing more than 6 percent of its shares at current prices. The stock rose about 6 percent in after-hours trading. Before the earnings announcement, it ended the regular session at $34.43, up by 44 cents.

In the recent months, Mr. Hurds has been tugging his executives to work harder in order to increase the revenue. After restructuring the company and doing some major cost-cutting in personnel and real estate, he said that company will carry on cutting its costs as it nourishes growth.

Besides an increment in the operating margins, the company also saw services and software department, which were earlier lagging behind, make profits.

One of the biggest surprises was the profit that the company made in the computer division in midst of so much competition, where companies like Dell, its chief rival was cutting down prices. Hewlett-Packard said the division’s operating profit margin was 4 percent, the highest it has been since the merger with Compaq in 2002.

Revenue from PC’s grew 8 percent, to $6.9 billion, with strong growth of 14 percent in the sales of notebook computers.

However, the cash yielding system was the printing and imaging division as always.