HP charges ahead with phenomenal fiscal Q4

If there's a recession on the horizon, someone forgot to tell HP. It had an extraordinary quarter and shows every sign of reinvesting its wealth into success for 2008.

It was bad economic times for the US economy that were blamed for the initial downturn in Hewlett-Packard's fortunes back in 2002, back when it seemed improper to lay blame at the feet of the company's then-esteemed leadership. But with a repeat of the economic chughole predicted by many economists, HP appears to be doing quite well, thank you, reporting that in its fiscal quarter ending in October, it earned 21% higher net profit on 15% higher revenue, with $2.3 billion in earnings.

Where's the strength coming from? Personal computers, whose overall market growth was predicted last year to come in at around 12%, whose forecasts were bumped up after the spring, and bumped back down in the summer. HP's unit growth in PCs is evidently magnificent, shipping 31% more systems in the previous quarter than for the year ago quarter. PCs now account for 35.6% of the company's $28.3 billion in revenue, while printers and imaging systems account for 26.8%.

Today, HP can earn more for each PC sold than it did last year. Operating profit for the Personal Systems Group accounted for 5.8% of that division's revenue, up from 4.3% of revenue in Q4 2006.

Back when HP's fortunes were bad, its business model with diverse revenue streams was credited with keeping it afloat, and helping it survive the tumultuous merger with Compaq. It was the printer division which kept HP on life support, and back then, this reporter and others broke the news that HP was, for all intents and purposes, an ink producing company.

So is it back to being a PC company again? The one thing about selling ink is that you don't have to put a whole lot of effort and overhead into the job. While operating profit for PSG reached $589 million for the quarter, operating profit for the imaging and printing group maintains its flat margin...of 14.5% of revenue, or $1.1 billion for the quarter. Yes, HP remains an ink company.

HP closed out its fiscal year 2007 with total revenue of a magnificent $104.3 billion, 14% higher than for fiscal 2006. And for its first fiscal quarter of 2008 - which includes the holiday season - the company projects solid, acceptable revenue of $27.4 - 27.5 billion. That's down from the previous quarter, and "seasonality" would dictate the guidance should tick up. But forecasts for holiday revenue are ticking down across the board, so a 3% downtick for HP does not seem all that bad.

Investors took the news somewhat positively today, with HP stock on the New York Exchange trading up slightly for the day: by about a quarter of a percent, to $49.56 per share.