HP’s outlook for next year unchanged despite tough economy

Hewlett-Packard reported its fourth fiscal quarter earnings this afternoon for the quarter ended Oct. 31 that were consistent with the company’s upbeat preliminary results. The surprising thing is that the world’s biggest information technology company left its guidance for the first quarter and the coming fiscal year unchanged, in spite of the economic doldrums.

Mark Hurd, chief executive of HP, said in a press conference call that the company believes it can execute on its plan despite a challenging economic environment. By contrast, companies such as Intel and Cisco have been much more cautious about their visibility.

He said he put more stock in the guidance for the first quarter, where the visibility is better, than for the entire fiscal year. He acknowledged that market conditions are volatile in part because of big fluctuations in currency rates. He said that he believed HP is poised to gain share and expand earnings in the downturn.

Palo Alto, Calif.-based HP reported that its fourth quarter revenue was $33.6 billion, up 19 percent from  $28.3 billion a year earlier. That was slightly higher than the $33.3 billion that analysts expected, according to Thomson Reuters. For the fiscal year, revenue was $118.4 billion, up 13 percent from a year ago. Fourth-quarter operating profit (using GAAP accounting, generally accepted accounting principles) was $2.7 billion, or 84 cents a share, up 4 percent from a year earlier. Non-GAAP operating profits were $3.4 billion, or $1.03 a share, up 21 percent from a year ago.

Hurd said the company expects to save $1 billion in the next year by integrating its recently acquird EDS computer services division into the company and through general corporate spending cuts. He added, “Our
intention is to get by without losing any muscle in the organization.”

The company reported the results after the markets closed on Monday. In after-hours trading, HP stock was down 20 cents to $35.50 a share.

HP is growing strongest in emerging countries such as Brazil, Russia, India and China — where revenue was up 23 percent from a year ago. Overseas revenue accounts for 68 percent of HP’s busiess. The PC group grew revenue 10 percent and unit shipments were up 19 percent. Notebook revenue grew 21 percent and desktop revenue was down 2 percent. The Imaging and Printing group and the Enterprise Storage and Server group both saw revenue fall 1 percent. The company gained the most in services, due to the EDS acquisition. The company exited the quarter with $10.2 billion in cash (notably, that’s less than the $25 billion that Apple has in the bank.

The company said that exchange rates will have an unfavorable effect on business going forward. For the first quarter, HP expects revenue of $32 billion to $32.5 billion. Non-GAAP earnings per share are expected to be 93 cents to 95 cents. For the full fiscal year, HP expects revenue of $127.5 billion to $130.0 billion. Non-GAAP earnings are expected to be $3.88 a share to $4.03 a share.