19 May 2004 Hewlett-Packard (HP) posted strong revenue growth and a jump in profits for its second quarter, following an upbeat performance that stretched across most of its broad technology portfolio.
Revenues for the three months ending 30 April 2004 grew by 12% to $20.1 billion, while net income for the quarter at $884 million was up 34% from $659 million for the same period last year.
Several analysts hailed the results as another sign of a sustained revival in technology spending. However, it was also clear that a weakening of the dollar against European and Asia-Pacific currencies significantly inflated the growth profile.
Buoyed by currency advantages, sales in Europe grew 17% to $8.3 billion while Asia-Pacific was up 22%. Revenues in the Americas region rose 4%.
Eliminating currency effects, overall revenue growth was a less spectacular 4%.
In a conference call, HP’s chairman and CEO Carly Fiorina described the growth as “balanced”, putting the results down to the company’s strategy of “high-tech, low-cost and best total-customer experience”.
She said the company experienced double-digit revenue growth in every major product area except in servers and storage, which recorded an 8% revenue increase to $4 billion. Strong sales of Intel- and Intel-clone servers of 15% was offset by slower sales of Unix mid-ranges machines and a surprising decline in storage revenues of 1%.
Meanwhile, services revenues grew 15% to $3.5 billion; software sales were up 23% to $222 million; and PC sales rose 17%.
As usual, the company’s printing and imaging group was the largest source of revenue, with sales up 11% to $6.1 billion. It also contributed the largest slice of the profits.
The results sparked a positive response among analysts. “Very seldom do most of HP’s cylinders all fire at the same time,” said Robert Cihra, an analyst at Fulcrum Global Partners in New York. “It was a solid quarter across the board.”
But despite this, there was at least one negative. HP’s software group remained unprofitable, although the company claims this is due to a requirement for heavy investment. That should change in coming quarters as HP’s Adaptive Enterprise Strategy, the company’s advanced infrastructure based on the utility computing model, matures.
Some analysts are unsure about whether the fierce competition from rivals such as Dell and IBM will allow HP’s to sustain such a performance for its fiscal second half.
Fiorina admitted that price competition remained intense, but said the company gave a stronger revenue forecast for its fiscal second half than Wall Street has expected, to between $39.7 and $40.7 billion.