Bullish HP highlights the troubles at Dell

Bullish HP highlights the troubles at Dell
By Kevin Allison in San Francisco
Published: November 16 2006 21:59 Last updated: November 17 2006 00:31
Hewlett-Packard on Thursday reported a four-fold rise in quarterly profit in the final quarter of what Mark Hurd, chief executive, called a “defining year” for the world’s second-biggest computer company.
“This was a strong performance. We took share and cash flow is at record levels,” Mr Hurd said. “Looking back, 2006 was a defining year for HP.”
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Quarterly net profit was $1.7bn, or 60 cents a share, up from 14 cents a share in the year-ago quarter. Operating profit, which excludes the effects of last year’s $1bn accounting charge and other exceptional items, rose 33 per cent in the period.
HP on Thursday said the Securities and Exchange Commission had issued a formal investigation into its inquiry over a boardroom spying scandal, which has tarred HP’s reputation this year, while the Federal Communications Commission has also requested information.
“We do not believe this represents an escalation or broadening of the investigation and are continuing to cooperate fully,” the company said in a statement.
HP also raised its quarterly guidance for the fifth consecutive quarter – a sign of continuing optimism that HP’s $1.9bn cost-cutting drive and renewed focus on sales would continue to deliver bumper results.
The bullish outlook stood in contrast to continuing troubles at Dell, HP’s chief personal computer rival. Shares of Dell fell as much as 4.5 per cent on Thursday, a day after the computer maker said it would be forced to delay its quarterly results until the end of the month because of accounting issues that have sparked a formal investigation by US regulators. They recovered to trade 2.5 per cent lower at $25.10.
HP executives have said that the company may soon overtake IBM as the world’s biggest IT company by revenues following IBM’s disposal of its PC business to Lenovo last year. Two market research groups recently found that HP overtook Dell as the top PC maker by shipments last quarter. Thursday’s rise in profits at HP came a year after the company took a $1.1bn accounting charge related to the cost-cutting drive launched by Mr Hurd shortly after he took charge of the company last year.
Revenues at HP rose 6 per cent to $24.6bn in the fourth quarter, driven by a pick-up in sales across the company’s business lines. Software sales grew the most in percentage terms, with revenues up 14 per cent over the period. Net profit for the full year was $6.2bn, or $2.18 per share, on revenues of $91.7bn.
Over the past 18 months, HP’s shares have nearly doubled. Dell’s shares, meanwhile, have fallen nearly 40 per cent from a high of $41.29 in July last year.