Update: HP revenue rises in Q1

Company saw increase in hardware and software sales, dip in revenue from services

Hewlett-Packard on Wednesday reported net revenue of $22.7 billion for its fiscal first quarter of 2006, ended Jan. 31, a 6 percent increase from the year-earlier period.

Operating profit, which excludes certain items, was $1.7 billion, with net earnings per share of 48 cents, up from 37 cents a year earlier.

HP beat expectations of analysts surveyed by Thomson Financial, which predicted revenue for the quarter of $22.5 billion and net earnings per share of 44 cents.

Based on GAAP (generally accepted accounting principles), HP's net income was $1.2 billion, up 30 percent from a year earlier, with earnings per share of $0.42, up from $0.32.

HP Chief Executive Officer and President Mark Hurd slightly tempered his enthusiasm over the company's first-quarter results with a look ahead at the company's ongoing restructuring.

"I'm very pleased with the quarter and I don't want to put a dark cloud over it, but we still have a lot of work to do to get the place optimized, and we know in the long run we can do better than we're doing," Hurd said on a conference call following the earnings announcement.

Hurd, who took the helm at HP in April of last year following the February ousting of Carly Fiorina, has embarked on a massive restructuring throughout HP that involves major consolidation of its data centers and IT sites worldwide and thousands of layoffs.

HP is "roughly on track with the restructuring," Hurd said.

"We said it was going to be a six-quarter process, and it's going to be about that. There are some regions that are frankly more difficult to get through, but I want to point out that we have chosen to tackle those ... we're going to get it done," Hurd said.

In July, Hurd said that as part of the restructuring HP would lay off thousands of employees, a move that would result in annual savings of $1.9 billion.

Since the restructuring started, HP has cut its workforce by about 6,500, which is about 30 percent to 40 percent of the total number of planned cuts, said Bob Wayman, executive vice president and chief financial officer for HP.

For the first quarter, HP saw higher sales across its hardware and software groups, while its services businesses took a dip.

First-quarter revenue for HP's Personal Systems Group (PSG) grew 8 percent year-over-year to $7.4 billion, driven by notebook revenue, which was up 26 percent from a year earlier. Desktop revenue was only up 1 percent year over year. Operating profit for the group was $293 million, up from $147 million for the year-earlier period.

HP's Imaging and Printing Group (IPG) posted revenue of $6.5 billion, up 8 percent from a year earlier, driven by strong sales of all-in-one devices, multifunction printers and color laser printers. Operating profit for the group was $973 million, up from $932 million for the prior-year period.

The Enterprise Storage and Servers (ESS) unit saw a 5 percent year-over-year increase in revenue to $4.2 billion. Operating profit jumped to $326 million from $69 million for the prior-year period.

On the software side, HP saw a 29 percent increase in revenue to $304 million from the year-earlier period, driven by sales of HP OpenView and HP OpenCall, which increased 34 percent and 19 percent, respectively. Operating profit was $9 million, compared with a loss of $38 million in the prior-year period.

HP Services (HPS) revenue declined two percent from a year earlier to $3.8 billion. Operating profit, however, went up to $293 million in the quarter from $281 million in the prior-year period.

For the current quarter, HP expects revenue in the range of $22.4 billion to $22.6 billion, with earnings per share between $0.43 and $0.45. Excluding certain items it expects earnings per share between $0.47 and $0.49.