The economic recovery appears to be in full swing at Hewlett-Packard, which on Wednesday reported major year-over-year sales and profit gains in the company's fiscal first quarter ending Jan. 31, 2010. HP CEO Mark Hurd summed it up for investors, saying bluntly, "The market is better."
HP closed out the final two months of 2009 and the first of the new decade with an 8 percent gain in revenue as compared to its first quarter a year ago, which occurred in the depths of a global recession. The computing giant had sales of $31.2 billion in its first quarter this time around, and also reported net income of $2.3 billion, a 25 percent increase on its numbers of a year ago.
HP's earnings per share were $0.96 for the quarter, up from $0.75 in the same period in 2009.
"HP is well-positioned to outperform the market," said Hurd. "The strength of our portfolio, leaner cost structure and accelerating market momentum give us the confidence to raise our full-year outlook."
Indeed, the Palo Alto, Calif.-based computing giant raised its 2010 revenue outlook to $121.5 billion to $122.5 billion, up from its previous estimate of $118.0 billion to $119.0 billion. As the world's largest high-tech company in terms of revenue and one with an enormous presence in both the consumer and commercial markets, HP is seen as a bellwether for the technology sector and the economy writ large.
"We will continue to invest for growth and leverage our scale and global position to take advantage of an improving demand environment," said Cathie Lesjak, HP's chief financial officer.
Perhaps most heartening for a technology sector that remains uncertain about enterprise IT spending, HP reported solid gains in hardware sales to business customers. Commercial server, client PC and printer sales were all up year-over-year, but Hurd held off on saying a full-blown corporate IT refresh cycle was already underway.
"We saw a pretty strong consumer market [in the first quarter]. We do think there will be a corporate refresh in the back half of the year," he said.
For the first quarter, HP's Enterprise Storage and Servers (ESS) business had sales of $4.4 billion, up 11 percent year-over-year, with industry standard server revenue increasing by 27 percent and blade server revenue up 24 percent. Balanced against that good news, however, was a 3 percent decline in storage sales and a 22 percent drop in HP's Business Critical Systems revenue.
Two more key HP hardware units posted encouraging results for the prospects of a return to healthy IT spending by businesses. Revenue for the Personal Systems Group (PSG) was $10.6 billion, up 20 percent year-over-year, and included a 16 percent increase in sales of commercial client PCs. HP's Imaging and Printing Group (IPG) had more modest gains, with first-quarter revenue of $6.2 billion representing a 4 percent year-over-year increase.
Hurd also highlighted HP's recent push of what it calls Managed Print Services through its partner channel, while Lesjak said cost-cutting at IPG was "not over."
Meanwhile, HP Services remained the company's biggest single business unit in terms of sales, though services revenue did slip by 1 percent against the year-ago quarter to $8.7 billion. HP Software revenue was also essentially flat at $878 million, while HP Financial Services revenue increased 13 percent to $719 million.
Regionally, HP reported its most robust year-over-year sales growth in the Americas, where first-quarter revenue was up 9 percent, and in Asia Pacific, where it was up 26 percent.
HP also said it expected that its acquisition of 3Com would be completed by the third quarter of 2010.