Software division leads HP recovery
SAN FRANCISCO -- HP reported revenue of $28.3 billion in its fourth fiscal quarter, ended Oct. 31. That's an increase of 15% from $24.6 billion a year ago. Every major division reported revenue gains.
But HP's fledgling software division was the star. Aided by the $4.5 billion purchase of Mercury Interactive in 2006, software revenue doubled to $698 million.
That's important, as HP is trying to move away from its dependence on traditional business such as PCs and printers, says software analyst Stuart Williams at Technology Business Research.
CEO Mark Hurd has been restructuring the company since he was hired in 2005, when HP was struggling with performance and management problems.
That job is not yet done, Hurd says. But the low-key Hurd acknowledged how far HP has come. "We like how we are positioned," he said in a conference call Monday.
HP said net income of $2.2 billion, or 81 cents a share, rose from $1.7 billion, or 60 cents a share, a year ago.
The company's PC division reported a 30% increase in revenue. Sales of back-office computer servers and storage systems jumped 4%. Low component prices helped.
The printer division — an industry juggernaut — wasn't as impressive. Revenue grew 4%; net income was flat. "We had expected a bit more pickup" in lucrative printer ink sales, says Josh Farina, hardware analyst at Technology Business Research.
HP could face bigger challenges going forward. The company's turnaround has been so impressive that "it will be difficult to keep their core business growing at this clip," says tech analyst Crawford Del Prete at researcher IDC.
HP has also benefited from market conditions that play to its strengths. HP's presence in retail stores has been a boon as consumer laptop sales took off, for example. But the market could shift at any time, Del Prete says.
Another threat: rival Dell, which has struggled with an accounting probe and other problems in recent months. Dell has launched its own recovery plan, which could make it a more formidable competitor.
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