HP announced additional job cuts Thursday after it reported that fourth-quarter earnings rose 7 percent, exceeding analyst expectations.
Profits for the period, which ended on October 31, were $416m (£242m), or 14 cents per share, on revenue of $22.91bn — after HP issued $1.1bn of adjustments on an after-tax basis. That compares with a profit of $1.1bn, or 37 cents per share, in the same period last year. Sales increased 7 percent, to $22.9bn from $21.4bn, the company said.
Without the special charges, HP earned $1.5bn, or 51 cents a share. Analysts expected the number two personal computer maker to earn 46 cents per share, according to a survey by Thomson First Call.
HP's profits were partially eaten up by $1.57bn in retirement and severance packages for 15,300 employees who will be leaving the company in the next 15 months. That number adds 800 layoffs not factored in to the 14,500 announced in July by chief executive Mark Hurd.
"On July 19, we had a model. As we discussed then, we had to operationalise [sic] the model, and 14,500 moved to 15,300," Hurd said during a conference call with reporters. "It was our best view at the time."
Hurd also announced that HP would issue its first significant bonus in several years for the remaining employees.
HP's financial report presents a contrast to a less-than-stellar report issued by Dell last week. Dell said its quarterly profit fell, amid a revenue slip, to $13.9bn, including costs to cut jobs and repair faulty parts in its business computers.
Comparatively, HP's Personal Systems group, which includes PCs and laptops, saw its revenue grow 9 percent to $7.1bn, with its unit shipments up 13 percent.
Hurd attributed the success of the division to an increase in laptop revenue, which grew 23 percent in the quarter to $7.11bn, up from $6.38bn a year ago. Unit sales of consumer notebooks rose 48 percent, Hurd said.
However, HP did announce on Thursday it has recalled 135,000 battery packs for its laptop computers, citing a fire hazard.
The company may also be spending more on redesigning its PC systems in the short term. The Blu-ray Disc group, which aims to set the standard for next-generation DVDs, said on Wednesday that it would not adopt a proposal from HP by the launch date for the technology, leading the PC maker to say it may back the rival HD DVD technology in a looming standards war.
Imaging and printing remain HP's strongest bread-and-butter business. The division reported revenue of $6.8bn, up 4 percent over the same period in 2004. On a year-over-year basis, consumer hardware revenue dipped 4 percent, though printer unit shipments rose 6 percent, HP said.
Storage and servers reported revenue of $4.5bn, while HP's Services revenue grew 6 percent year-over-year to $3.9bn, the company said.
The computer and printer maker saw its biggest regional gains in the Asia-Pacific region, where it grew 12 percent in the last year to $3.8bn.
Growth in the region may suffer a bit in the next three months after the Chinese government said on Wednesday it will purchase more than $20m worth of computers from IBM, a contract won from HP.
HP's stock was up 2.4 percent to $28.95 before release of HP's quarterly earnings. At the close of regular trading, HP shares were up $1.45 to end the day at $28.68. HP's gains helped the Dow Jones Industrial Average gain 26.81 points, or 25 percent, to end the day at 10,701.57. HP's earnings report was issued after the close of regular trading.
HP is predicting that its earnings per share in the first quarter for its fiscal year 2006, which started Nov. 1, will be in the range of 46 cents to 48 cents per share, excluding as much as 4 cents of stock-based compensation expense, or as much as 44 cents if the number crunchers toss in stock-based compensation as an expense.
