Hewlett-Packard topped Wall Street's revenue and earnings expectations in the first quarter of its 2007 fiscal year.

Excluding $279 million in adjustments on an after-tax basis, net income for HP (NYSE: HPQ) was $1.8 billion, or $0.65 a share, exceeding the consensus forecast for $0.62 per share from analysts polled by Thomson Financial.

HP described the expenses as related primarily to the amortization of purchased intangibles and in-process research and development charges related to acquisitions. It also cited stock-based compensation expense in both current and prior years.

Revenue came in at $25.1 billion, up 11 percent from last year's first quarter and above the $24.27 billion analyst forecast.

Growth came from HP's personal systems group, which is desktop and laptop computers for consumers, with a 17 percent year-over-year revenue growth, and from imaging and printing, with 7 percent revenue growth.

HP topped rival Dell as the leading seller of personal computers in 2006, according to IDC. At financially troubled Dell, former CEO and Chairman Michael Dell returned to the CEO office following the ouster of Kevin Rollins last month.

While Chairman and CEO Mark Hurd said the quarter was strong overall, he was disappointed with the company's enterprise storage and server products unit.

Revenue in that division grew 5 percent to $4.5 billion, and greater efficiency meant the company made more profit from the business. However, storage revenue alone grew only 3 percent, Hurd said. Although its midrange EVA line of storage products sold well, sales of its tape storage products and high-end storage devices were weak.

"We have got to drive top-line growth," he said. While HP has been hiring new salespeople, it also needs to develop more sales prospects. "We just don't cover enough accounts," Hurd said.

Meanwhile, an austerity program at the company continues.

HP took further steps to reduce overhead by announcing the end of the company's pension plan as of Jan. 1, 2008, relying solely on a defined contribution plan as the company-sponsored employee retirement plan. In a defined contribution plan, such as a 401(k), an employer contributes a certain amount to a fund but doesn't guarantee a specific retirement benefit.

HP anticipates a "pension curtailment benefit" of $500 million from no longer funding pensions, but the savings will be largely offset by an early retirement incentive it is offering to employees, said Cathie Lesjak, HP's CFO.

Lesjak said HP anticipates about 3,000 employees will take the early retirement offer, which is good until May 31, and that most of the vacancies will be refilled.

This story was updated on February 20, 2007