HP Silences Critics With Stellar Quarter
In a stock market desperately searching for good news, HP's quarterly numbers provided a much needed boost.
Since joining HP in 2005 as the permanent replacement to controversial CEO Carly Fiorina, Mark Hurd has engineered a stunning comeback. In fact, this quarter revenue grew at the fastest rate that it had since 2000, amidst the height of the dot-com boom.
Some on Wall Street feared that the company's sheer size would prevent it from growing substantially, however HP seems to have allayed those fears. Additionally, post restructuring the company has proved that it can still grow in some of its traditional businesses.
Year-over-year profits grew 29 percent and revenue 16 percent in the computer maker's traditionally weak third quarter. Much of the comeback could be explained through its resurgence in PCs: the company recently surpassed heavyweight Dell for the top spot in worldwide shipments.
HP stock closed the day on Wall Street up $1.10 or 2.39 percent to $47.15, after being as high as $48.25 in heavy trading.
"HP's latest results demonstrate continued strength across each of our key businesses and geographies," Hurd said of the results. "We are executing increasingly well in creating demand for our innovative products and services, and we are continuing to become a more efficient organization."
The company's confidence is showing in its quarterly forecasts for its fiscal fourth quarter that ends in October, and its full year 2007 numbers: it now expects quarterly revenue to be about $27 billion and full year revenue about $103 billion.
By division, HP's software group grew the most, with revenue up 74 percent to $554 million. HP said that much of the growth was due to the businesses it acquired as part of its purchase of Mercury Interactive. The PC division also fared well, up 29 percent to $8.9 billion, as did the Financial Services portion of its business, up 12 percent to $582 million.
Analysts say the most impressive growth lies in HP's PC business. The company's turnaround there is likely to benefit HP for years to come, as emerging markets still can provide computer manufacturers significant avenues of income.
"Simply put, HP is just executing brilliantly," Anders Bylund wrote for The Motley Fool. "That's bad news for archrival Dell, which seems to have lost its market-share leadership to HP for the foreseeable future. On the other hand, this report is good news for an entire industry."
Bylund argues that HP's investments in itself and also various technology markets would benefit the sector as a whole.