HP Posts Greater-Than-Expected Q3 Profits, On Track With Biggest IT Split Ever

Hewlett-Packard on Thursday surprised Wall Street by posting greater-than-expected profits for its third fiscal quarter, ended July 31.

The better-than-forecasted profits came as the computer giant began operating as two independent Fortune 50 companies Aug. 1 in anticipation of its formal split Nov. 1.

HP reported earnings per share after charges of 88 cents on sales of $25.3 billion. The Wall Street consensus was diluted net earnings of 85 cents per share on an 8 percent decline in sales to $25.4 billion.

[Related: 10 Things You Need To Know About HP's Aug. 1 Operational Split]

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"HP delivered results in the third quarter that reflect very strong performance in our Enterprise Group and substantial progress in turning around Enterprise Services," said HP CEO Meg Whitman in a statement. ’I am very pleased that we have continued to deliver the results we said we would, while remaining on track to execute one of the largest and most complex separations ever undertaken.’

The stronger-than-expected quarterly results came just 19 days after the computer giant began operating internally as two separate independent Fortune 50 companies: Hewlett Packard Enterprise, a $55 billion business made up of enterprise systems, storage, services and software; and HP Inc., a $55 billion PC and printing business.

Kelly Ireland, founder and CEO of Orange, Calif.-based CB Technologies, an HP Platinum partner doing business with both HP's enterprise and PC businesses, said she is adding new sales and technical talent to drive sales growth as HP splits into two companies. She said she expects both new companies to move faster and drive more innovation as a result of the split.

"I was at HP's headquarters right before the August 1 split and you could feel the calmness and confidence coming from the HP team," she said. "Meg and her team has done amazing job with the split. It is consistent with the way she has done everything at HP."

HP's enterprise group sales were up 2 percent, to $7 billion, in the quarter, compared with $6.87 billion in the year-ago quarter. The enterprise group was boosted by a whopping 22 percent increase in networking sales in the wake of HP's $3 billion acquisition of Aruba Networks on May 19. HP industry-standard servers were up 8 percent in the quarter.

HP's Enterprise Services sales were down 11 percent in the quarter, to $4.97 billion, compared with $5.59 billion in the year-ago quarter. Infrastructure technology outsourcing sales were down 13 percent in the quarter.

Ireland said CB Technologies is one of HP's partners benefiting from new HP solution offerings with a heavy vertical focus from the HP enterprise group. "Our third-quarter sales were up 90 percent with HP," she said. "This wasn't standard transactional business. This was all about sales of new-style IT HP enterprise solutions."

Even with the better-than-anticipated quarterly results, HP shares were down 35 cents, or 1 percent, in after-hours trading, to $27. That was a result of HP's guiding results down for its fourth fiscal quarter.

HP said it expects diluted earnings per share in the range of 92 to 98 cents per share, compared with analysts' estimates of $1 per share.

HP said fiscal fourth quarter diluted earnings excludes about 80 cents per share related to separation costs and other restructuring charges.