HP Hardware Business Drives Strong Q3 Revenue, Earnings Growth

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Hewlett-Packard on Thursday reported double-digit revenue growth and a 6 percent growth in profit for its third fiscal quarter of 2010, and raised its outlook for the entire year based on investments in some new technologies.

HP attributed its third fiscal quarter growth to strengths across all its product lines and across all its geographies thanks to having one of the most complete product offerings in the industry.

For its third fiscal quarter of 2010, which ended July 31, HP reported revenue of $30.7 billion, up 11.4 percent compared to the 27.6 billion it reported during the same quarter last year. Revenue grew a healthy 12 percent in the Americas.

HP also reported earnings of $1.8 billion, or 75 cents per share, up six percent from the $1.7 billion, or 69 cents per share, it reported last year.

The results reflected strong growth that highlights HP's diverse offerings and its strong position in the market which allows the company to use its financial strength to invest in a balance of growth and efficiency, said Cathie Lesjak, HP's CFO and interim CEO.

When questioned about the recent departure of former CEO, President and Chairman Mark Hurd, an HP executive responded that his exit is having little impact on the company.

While Hurd was well-known for visiting with clients on a very frequent basis, HP has general managers working with all the company's top accounts, and is increasing the number of sales reps, said Ann Livermore, executive vice president of HP's enterprise business.

As a result, customers will not see much of a change, Livermore said. "My staff and I have personal relationships with all our top accounts," she said.

Hurd left the company Aug. 6, following the conclusion of a sexual harassment investigation in which he was found in violation of HP's Standards of Business Conduct, though not its sexual harassment policy.

Revenue for HP's Enterprise Storage and Servers (ESS) business grew 19 percent over last year to total $4.4 billion. That includes a 31 percent increase in industry standard server revenue, a 29 percent growth in blade server revenue, and a 10 percent growth in storage. However, the company's business critical systems revenue fell 15 percent as customers waited for a new release of HP's Non Stop server line, expected in the current quarter, Lesjak said.

When asked during the analyst question and answer session why HP's storage business grew only 10 percent, which was much lower than the growth rate of competitors such as EMC and NetApp, Lesjak said that many of the company's storage assets are new and relatively small, and have not had the opportunity to make a major impact on HP's storage business.


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