Following Another Solid Quarter, HP?s Hurd Remains Optimistic

Hewlett-Packard???s restructuring, belt tightening and revamped channel-compensation programs contributed to a 30 percent year-over-year growth in profit for the first fiscal quarter, according to company president and CEO Mark Hurd.

February 16, 2006

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Hewlett-Packard’s restructuring, belt tightening and revamped channel-compensation programs contributed to a 30 percent year-over-year growth in profit for the first fiscal quarter, according to company president and CEO Mark Hurd.

In a company conference call Wednesday with the media that preceded its call with analysts to review the company’s first-quarter earnings, Hurd said HP is becoming more profitable as a result of its overall belt tightening, which began in July.

“We’ve been really working to get ourselves in health-shape form a cost perspective, so in the end we can grow more effectively and more efficiently,” Hurd said. The company’s efforts to improve compensation to partners, rewarding those who attach more products, are paying off, he added.

“We are doing our best to align our channel compensation around people who really align with our strategy to drive more and more attach and more HP technology to the market,” Hurd said. “We think it fits in the context of helping the customer. I think we’ve seen a positive effect of that.” Revenue for the quarter was $22.7 billion, up 6 percent over the same period last year. Hurd said that figure was masked by currency fluctuations. Without such fluctuations, he said revenue growth would have been 8 percent.

“Our growth really is quite strong across most of our segments when you adjust for the currency effects,” Hurd said. “So I think for us, being able to continue in the direction that we just gave in Q1 would be certainly promising for us going forward.”Among some key highlights for the period:

  • Personal Systems Group revenue increased 8 percent year-over-year to $7.4 billion, with unit shipments increasing 16 percent. Desktops revenue was up 1 percent, and notebooks grew 26 percent. Commercial PC revenue grew 6 percent, while the group posted a profit of $293 million, or 3.9 percent of revenue, up from a profit of $147 million, or 2.1 percent of revenue.

  • Imaging and Printing Group revenue was up 8 percent to $6.5 billion. Of note, MFP shipments grew 40 percent, and color-lasers shipments were up 36 percent. Overall profit was $973 million, or 14.9 percent of revenue, up from $932 million, or 15.4 percent of revenue.

  • Enterprise Storage and Servers posted $4.2 billion in revenue, up 5 percent year-over-year.

  • Software once again had its second consecutive quarter of profitability, albeit slim. With revenue of $304 million, up 20 percent, that amounted to a $9 million profit.

  • Services revenue was down 2 percent to $3.8 billion, though profits were up, posting $293 million, compared to $281 million.

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