Hewlett-Packard Co. beat Wall Street’s expectations Wednesday, when the computer maker reported that fiscal third-quarter profit surged on strong printer and laptop sales. The company’s shares gained more than 5 percent in after-hours trading.
But if you read through the entire article, there is some interesting, even disconcerting information.
This excerpt is interesting.
For the three months ended July 31, HP earned $1.38 billion, or 48 cents a share, compared with $73 million, or 3 cents per share, in the same quarter last year.
The year-ago numbers were dramatically lower because of a tax charge that resulted when the Palo Alto, Calif.-based company pulled $14.5 billion from foreign earnings and “repatriated,” or reinvested, those profits in the United States.
For those who are concerned about the amount of US money going oversees, this would seem to be good news. But there's more.
Sales in the fiscal third quarter rose 5 percent to $21.89 billion from $20.76 billion last year. If not for currency fluctuations, sales would have increased 6 percent.
Excluding one-time items, the company earned $1.48 billion, or 52 cents per share, up nearly 40 percent from the same quarter last year.
On that basis, which does not comply with generally accepted accounting principles, HP beat Wall Street expectations by 5 cents per share. Analysts were expecting the company to earn $1.37 billion, or 47 cents a share, on sales of $21.8 billion, according to a Thomson Financial survey.
If you're a stakeholder in HP, does it make you feel good their numbers "[do] not comply with generally accepted accounting principles"? I'm not so sure. Here are some more traditionally accepted economic numbers.
Revenue from HP’s printer division grew 5 percent to $6.2 billion. HP revenue from laptops increased 14 percent, as the overall “personal systems” division sold $6.9 billion in desktops, laptops and other computers, 8 percent more than the same quarter last year.
Software sales were particularly strong, with 30 percent year-over-year growth. The company, which sold $318 million in software last quarter, will likely complete the acquisition of management software company Mercury Interactive Corp. in the current quarter.
But sometimes there's a downside to profitability.
HP, which employs about 150,000 people, has been slashing jobs in offices worldwide since launching an aggressive cost-cutting campaign in July 2005. The company shed 1,900 jobs last quarter. Hurd said “several thousand jobs” would be cut in the current quarter.
So even though Wall Street feels better about things, Main Street might not.
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