HP escapes the summer doldrums as PC sales pick up

It turns out the PC market isn’t so dead after all.

Hewlett-Packard reported better-than-expected earnings today for its third fiscal quarter ended July 31. The tech giant, whose earnings are a bellwether for the consumer and enterprise computer markets, said that its third fiscal quarter earnings were 89 cents a share while revenues were $27.6 billion.

Analysts had expected HP to report a net profit of 89 cents a share, compared with a profit of 86 cents a share a year earlier. They also expected HP to report sales of $27.03 billion, down from $27.23 billion a year ago. Back in May, HP said it would cut an additional 16,000 jobs on top of its previous cost-cutting plan. In after-hours trading HP stock is down 1 percent.

“Overall, I’m very pleased with the progress we’ve made,” said Meg Whitman, chairman, president, and chief executive of HP, in a statement. “When I look at the way the business is performing, the pipeline of innovation and the daily feedback that I receive from our customers and partners, my confidence in the turnaround grows stronger.”

HP’s turnaround has been a long time coming, and it still isn’t done. HP is facing stiff competition in the enterprise market, where the rise of cloud computing is causing a lot of disruption. On top of that, computers are starting to lose sales to mobile devices. That has made the recovery more challenging and less predictable.

The massive compnay said its expects fiscal fourth quarter earnings to be $1.03 a share to $1.07 a share on a non-GAAP basis. For the full year, HP expects $3.70 a share to $3.74 a share.

HP said that the personal systems group, which sells consumer and business PCs, saw revenue grow 12 percent from a year ago. Commercial systems revenue was up 14 percent and consumer revenue was up 8 percent in the quarter. Unit sales grew 13 percent in the quarter, with desktops up 9 percent and notebooks up 18 percent.

Printing revenue was down 4 percent from a year ago, but it still had a healthy 18.4 percent operating margin. Enterprise group revenue was up 2 percent, while services was down 6 percent. Software revenue was down 5 percent.

“HP is in the middle of its planned turnaround and had a decent quarter as they met Wall Street expectations,” said Patrick Moorhead, an analyst at Moor Insights & Strategy. “Standouts included business and consumer PCs, servers, and networking. This bodes well for HP as companies like Cisco were flat in networking and IBM was down 3 percent in x86-based servers and down 28 percent in Power Systems. HP still has to show overall revenue growth potential moving forward, but has some time to do this as Whitman gave them years of breathing room as she mapped out the five year plan.”