HP Earnings Fall but Beat Wall Street Expectations

SAN FRANCISCO — Hewlett-Packard said Tuesday that quarterly earnings dropped sharply because of hefty taxes from bringing back money from overseas.

But the No. 2 PC maker said its fiscal third-quarter earnings beat Wall Street expectations, thanks to strong unit sales of notebook PCs, color laser printers and storage devices amid a corporate restructuring and job cuts.

HP’s shares rose 6.7% to $25.29 in after-hours trading on the news, which was released after the markets closed.

HP reported net income of $73 million, or 3 cents a share, in its quarter ended July 31. That’s down from $586 million, or 19 cents, the year before. If not for $988 million in taxes on repatriated foreign earnings, HP said, it would have earned 36 cents a share.

HP’s revenue of $20.8 billion improved 10% from $18.9 billion last year. Financial analysts surveyed by Thomson Financial expected earnings of 31 cents on revenue of $20.5billion. “We are focused on driving further performance improvements,” HP CEO Mark Hurd said in a conference call.

Last month, Hurd announced 14,500 job cuts, or about 10% of staff. The cuts are expected to save $1.9 billion a year.

The quarterly results come on the heels of mixed announcements from Dell and Gateway. Both reported stout PC sales but cautioned that pricing pressures would undercut their previous growth forecasts.

HP’s results reflect its decision last year to pursue profits instead of market share for its PC division. The division’s profits improved to $163million from $23 million a year ago. Operating profit for HP’s imaging and printer unit was $771million, down from $836 million a year ago.

The Silicon Valley pioneer says it expects fourth-quarter revenue of $22.4 billion to $22.8 billion, with earnings of 44 cents to 47 cents a share. Both ranges exceed analysts’ estimates.

“This represents a clear example of what happens when employees throw their weight at execution, and morale improves,” says technology strategist Mark Stahlman, at investment firm Caris & Co.

HP’s results are an improvement from a year ago, when its enterprise systems group stumbled, leading to the ouster of then-CEO Carly Fiorina in February.