HP Reports Earnings Growth, Outlines Plans For 3Com, Palm

HP also appears set for the future, with its 3Com and Palm acquisitions expected to contribute to growth, although not always in ways most people expect, the company’s top executives said at a financial conference call on Tuesday afternoon.

HP reported revenue for its second quarter, which ended April 30, of $30.8 billion, up 13 percent from the $27.4 billion it reported for the same period last year.

The company also reported earnings of $2.2 billion, or 91 cents per share, up 28 percent from the $1.7 billion, or 71 cents per share, it reported last year.

That growth was spread out across much of the company. HP reported revenue grew by 31 percent for its Enterprise Systems and Storage (ESS) group, 21 percent for its Personal Systems Group (PSG), 18 percent for its Financial Services business, and 8 percent for its Imaging & Printing Group (IPG).

Professional services revenue, however, grew only 2 percent over the same period of last year, while software revenue actually dropped 1 percent, HP reported.

HP Chairman, CEO, and President Mark Hurd started off the conference call by focusing on a couple of key trends where HP is doing well.

HP is the clear winner in the converged infrastructure market thanks to strength in a number of areas, Hurd said. For instance, he said, HP has a market share for blade servers of over 50 percent, and is the only company to have PC, mission critical, storage, and networking blades in a single chasses.

With HP’s recent acquisition of Palm, HP will also become a strong force in a variety of new product types, Hurd said. HP will use the Palm technology to build slate PCs and other mobile devices, as well as build Web-connected printers.

HP will be able to leverage its Palm intellectual property in a number of products. However, he said the Palm operating system will not impact HP’s relationship with Microsoft. “Microsoft is still our best partner, and still attractive for us,” he said.

HP never thought of Palm as a way to increase its business for one product, particularly smart phones, Hurd said. Instead, HP wants to meet the needs of consumers looking for many ways to get connected. “We expect to play across the gamut of products customers want to use,” he said.

The recent acquisition of 3Com also gives HP a full range of networking gear, including its existing ProCurve business and its Virtual Connect business, which allows customers to take advantage of virtual networking ports to cut the number of ports they need.

Even without including revenue from 3Com, HP’s networking revenue grew 31 percent compared to last year, Hurd said.

HP’s networking business is not ProCurve, or 3Com, or Virtual Connect, Hurd said. “It’s all of these capabilities brought together,” he said.

HP’s laser printing business was not as strong as HP desired because of product constraints, but the company has a strong backlog, and is looking forward to a strong third quarter, Hurd said. He called brand loyalty to HP’s Laserjet “amazing.”

Looking forward, HP is expecting third quarter 2010 revenue to be between $29.7 billion and $30.0 billion, up from the $27.5 billion it reported in the third quarter of 2009.

For the full year, HP expects revenue to be up 8 percent to 9 percent over last year.