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HP: Revenue Increases 10 Percent But Profits Taxed

Despite the tumult brought on by a dramatic reorganization of its struggling business and a historically weak season, Hewlett-Packard posted strong, double-digit revenue growth in several of its key business segments for its third fiscal quarter ended July 31.

Overall, revenue grew 10 percent to $20.8 billion. However, the company's earnings did not keep pace with revenue growth. HP reported net income of just $73 million, or 3 cents a share, as a result of tax adjustments from the repatriation of $14.5 billion in foreign earnings. Take that write-off away, though, and net income was $1.06 billion, or 36 cents a share. Consensus forecasts were at 31 cents a share.

HP's enterprise business--under the microscope by the company's new president and CEO, Mark Hurd, and industry observers, in general--improved markedly. Enterprise servers and storage revenue increased 20 percent, reaching $4 billion, and profits increased 3.8 percent, or $150 million.

That's a nice turnaround, considering that same segment saw its revenue decline 5 percent, while losing $211 million during the same period last year, when it was unable to fulfill orders for months, thanks to a faulty supply-chain system overhaul. The company's storage revenue was up 15 percent for this year's third quarter.

Hurd, who last quarter described the company's underperforming enterprise server, storage and software business as "off benchmark," said Tuesday that the business is turning around, thanks to key product refreshes of its EVA storage line, among others, and help from the channel.

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