Hewlett-Packard Co. reclaimed the title of world’s largest personal computer maker from Dell Inc. last quarter, taking market share and posting a fourfold rise in profit.
Chief Executive Officer Mark Hurd attributed the performance to better customer service as well as job and other cost cuts.
“We’ve had improvements in customer satisfaction, we’ve had improvement in profit, and we’ve gained share,” Hurd said in a telephone interview yesterday after the Palo Alto, California- based company released fourth-quarter results. “It’s really more the fact that all three happened that causes us to be happy.” Hewlett-Packard’s net income jumped to $1.7 billion, or 60 cents a share, and sales rose 7.2 percent to $24.6 billion, surpassing analysts’ expectations. PC shipments rose 10 percent and earnings in the unit surged 68 percent to $336 million, widening the profit margin to its highest level in four years.
Hewlett-Packard’s ability to sell through a network of more than 140,000 retailers including Wal-Mart Stores Inc., rather than relying on online or telephone sales, helped attract U.S. consumers clamoring for notebook PCs, Hurd said.
Those consumers in turn helped the company recapture the top PC spot for the first time since 2003.
‘Steady Improvements’ Benjamin Reitzes, an analyst at UBS AG, today raised his earnings estimates on Hewlett-Packard for the current quarter and the company’s 2007 and 2008 fiscal years. Goldman Sachs Group Inc. analyst Laura Conigliaro raised her estimates on Hewlett- Packard for the second time in a week.
“HP continues to show that its value creation effort has long legs and should result in steady improvements to operating margins, already well ahead of plan,” Conigliaro said in a note to clients.
Shares of Hewlett-Packard, trading near six-year highs, declined 62 cents, or 1.5 percent, to $39.51 at 12:06 p.m. in New York Stock Exchange composite trading. This was the seventh straight quarter that profit exceeded analysts’ estimates.
Hewlett Packard’s total sales in fiscal 2006 passed those of International Business Machines Corp., the world’s biggest computer-services provider. Hewlett-Packard had $91.7 billion in revenue, compared with $89.6 billion at Armonk, New York-based IBM during the past comparable four quarters.
“It hasn’t been our sole objective to be the No. 1 market leader,” said Hurd, who took over as CEO in April 2005. “It’s been our objective to be competitive, to gain share and to do that profitably.” SEC Investigation The results show Hurd’s success in overcoming a scandal into boardroom leaks. Hewlett-Packard yesterday said the U.S. Securities and Exchange Commission stepped up its probe of how the company handled an internal investigation with a formal order that lets the agency issue subpoenas. The Federal Communications Commission yesterday also requested documents from the company.
The company today said Wachovia Corp. CEO G. Kennedy Thompson, 55, was elected to the board. He fills one of three vacancies left after Chairwoman Patricia Dunn and directors George Keyworth and Thomas Perkins resigned in recent months over the leak probe.
Hurd continues to reap the benefits of a July 2005 plan to eliminate 15,300 jobs, or 10 percent of the workforce, to save $1.9 billion a year. The company cut 4,200 positions in the quarter, bringing the total so far to 14,200.
The savings are preserving profit margins as Hurd slices prices to challenge Round Rock, Texas-based Dell. The companies compete in selling PCs, printers, storage devices and server computers, which run corporate networks and Web sites.
Hewlett-Packard said profit this period excluding some costs will be 60 cents to 62 cents a share on sales of $24.1 billion to $24.3 billion. Nineteen analysts polled by Thomson Financial on average estimate profit of 60 cents and sales of $23.9 billion.
