Hurd’s last hurrah: HP hits earnings targets

Hewlett-Packard reported that it hit its revenue and earnings targets for the third fiscal quarter ended July 31. It was former chief executive Mark Hurd’s parting gift for HP.

HP said revenues were $30.7 billion, up 11 percent from $27.6 billion a year ago. GAAP net earnings were $1.8 billion, up 6 percent from $1.7 billion a year ago. Non-GAAP net earnings were $2.6 billion, up 15 percent from $2.2 billion a year ago. GAAP earnings per share were 75 cents, compared to 69 cents a year ago. Non-GAAP earnings per share were $1.08, compared to 92 cents a year ago. HP’s stock price has fallen slightly in after-hours trading, dorn 21 cents to $40.55 a share.

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Today’s earnings are being closely watched because HP’s results for the third fiscal quarter will be the last under the five-year reign of Hurd, who was fired Aug. 6 after irregularities emerged in an investigation of his dealings with an HP marketing contractor.

At the time that HP fired Hurd, HP announced preliminary results to reassure the stock market, but in the days after Aug. 6, the stock price fell anyway. The results today are pretty much in line with the preliminary data. HP’s stock value remains about $12 billion below where it was when Hurd was fired.

“The broad-based strength of HP’s Q3 performance further demonstrates the power of our strategy and the discipline of our execution,” said Cathie Lesjak, HP chief financial officer and interim chief executive. “We raised our full-year outlook and are continuing to build momentum in driving out costs, investing for profitable growth and capitalizing on HP’s competitive advantages in the marketplace.”

HP’s fastest-growing division this quarter was the enterprise storage and servers group, which was up 19 percent. Intel-compatible server revenue grew 31 percent. That’s consistent with strong growth for Intel and Dell.  HP’s PC division, the Personal Systems Group, grew 12 percent. Services grew 1 percent and software grew 2 percent. The printing group grew 9 percent.

Results from the newly acquired Palm business were not mentioned. (Palm’s earnings are so small that they likely make little material difference in HP’s results). In a call with the press, Lesjak said the company was particularly strong in hardware sales, and she said that HP’s strategy hasn’t changed. She said the 300,000 employees of HP are “looking forward, not back,” a reference to Hurd’s departure. Lesjak said that customers, employees and investors are 100 percent behind HP, in spite of Hurd’s firing. She said HP continues to execute well and said she saw no reason to change HP’s successful strategy.

“Mark Hurd left this company in great shape,” Lesjak said.

HP has hired a search firm to assist with its search for a permanent CEO. Lesjak has said she is not in the running to be the permanent CEO. HP also got hit with a second shareholder suit related to the firing of Mark Hurd. HP also bought security firm Fortify Software; that deal will bring it into competition with Intel, which today bought security vendor McAfee.

The non-GAAP results were impacted by a 2 cent per share charge related to a settlement with the U.S. Department of Justice over a contract bribery scandal.

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For the fourth fiscal quarter, HP estimates revenue of $32.5 billion to $32.7 billion. GAAP earnings per share is expected to be $1.03 to $1.05 while non-GAAP earnings per share are expected to be $1.25 to $1.27. Full year revenues are expected to be $125.3 billion to $125.5 billion, and GAAP earnings per share are expected to be $3.62 to $3.64. Non-GAAP earnings per share are expected to be $4.49 to $4.51.