Hewlett-Packard beats Street estimates

Scott Martin, USA TODAY 6:44 p.m. EST November 26, 2013

(Photo: Paul Sakuma AP)

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SAN FRANCISCO — Hewlett-Packard narrowly topped profit estimates on revenue that beat Wall Street's expectations, prodding shares higher in after-hours trading.
The computing giant on Tuesday reported fourth-quarter net income of $2 billion on $29.1 billion in sales.
The Street had forecast HP to report net income of $1.94 billion on $27.9 billion in sales, according to a survey of estimates from Thomson Reuters. Excluding expenses, HP was expected to earn $1 per share. On that basis, it reported $1.01 per share.
CEO Meg Whitman said the earnings results indicate that HP's turnaround strategy is on track.
Shares of HP rose 8%, to $27.10 in after-hours trading following the report.
The 74-year-old HP has been stung by shifting consumer preferences for mobile computing devices, resulting in declines across the PC industry.
"There are very few old-school PC manufacturers that have been able to make the jump to tablets," says IDC analyst Crawford Del Prete.
Worldwide personal computer shipments plummeted 8.6% in the third quarter from a year ago, with back-to-school PCs moving at the lowest level since 2008, according to researcher Gartner. HP shipped 13.7 million PCs in the quarter, compared with 13.5 million in same period a year prior.
Those declines come as worldwide smartphone shipments are forecast to surge nearly 40% to more than 1 billion units this year, according to IDC.
Even Apple, whose iPad has eaten into the PC market, saw its fourth-quarter Mac sales slide to 4.6 million units, compared with 4.9 million a year ago.
Lacking popular smartphones and tablets, HP has seen not only its PC sales struggle, but its printers, services and hardware, as well.
"We've had good quarters and not-so-good quarters (during an extended turnaround plan). This was a good one," Whitman told USA TODAY in a phone interview. She said the company's tablet strategy could yield exciting commercial results when the company unveils new models next year. "The innovation engine is alive and well; that is an untold story here."
HP has struggled for years to pivot from a low-margin PC business into faster-growing and more profitable services sectors.
HP's turnaround plan under Whitman has so far shown few signs of returning growth to the beleaguered company. Analysts say HP needs to better articulate its cloud-computing and storage strategy, among other areas, to reverse course.
In May of last year, HP announced plans to lay off 27,000 employees, or 8% of its workforce, by October of 2014. HP's cutbacks — equal to nearly the entire population of Menlo Park, Calif. — are a bid to save $3 billion to $3.5 billion a year once layoffs are completed.
"They are managing the business with really tight expense controls," says Del Prete.
Analysts were expecting HP's sales in the quarter to plummet nearly 7% from a year ago, leaving fiscal year sales down almost 8% at $111.1 billion. Sales were down just 3% in the quarter from a year ago.
"This is just another chapter in the HP turnaround story," says Del Prete.