| Hewlett-Packard Co., the world's No. 2 personal-computer seller, said second-quarter profit rose 51 percent as the company took orders from Dell Inc. Earnings this quarter may top analysts' estimates, sending the shares higher.
Net income rose to $1.46 billion, or 51 cents a share, from $966 million, or 33 cents, a year earlier, Palo Alto-based Hewlett-Packard reported Tuesday. Sales rose 4.6 percent to $22.6 billion in the period ended April 30.
Chief Executive Mark Hurd sliced expenses in his first year in the post, enabling Hewlett-Packard to preserve earnings as he cut prices to beat Dell for PC purchases. Earnings in the PC and server units each gained more than 65 percent in the quarter, and profit margins on printers exceeded estimates.
"They're giving Dell a pretty good run for their money," said Roger Kay, an analyst with Endpoint Technologies Associates in Wayland, Mass. "Things were solid across the board."
Profit, including stock-based compensation and excluding some costs from acquisitions, was 54 cents a share. Goldman Sachs Group Inc.'s Laura Conigliaro expected 49 cents on sales of $22.6 billion. Her estimates matched the average projections from a Thomson Financial survey.
Shares of Hewlett-Packard, also the world's biggest printer maker, rose $1.29 to $32.40 in extended trading after the report. They had dropped 52 cents to $31.11 in regular New York Stock Exchange composite trading Tuesday and have gained 8.7 percent this year.
Of 30 analysts tracked by Bloomberg, 18 recommend buying the stock and 10 suggest holding it. Two recommend selling.Profit this quarter will be 45 cents to 48 cents a share, excluding some items, and net income will be 41 cents to 44 cents, Hewlett-Packard said. That would beat the average estimate of 43 cents from a Thomson Financial analyst survey. Thomson declined to disclose what costs are excluded from its estimates.
Sales will advance to $21.8 billion from $20.8 billion a year earlier, in line with the average estimate of $21.8 billion.
The report underscores Hurd's progress in turning around Hewlett-Packard. He is more than halfway done with a July plan to eliminate 15,300 workers, allowing him to outshine Round Rock, Texas-based Dell, which last week said profit missed its forecast after price reductions crimped earnings. Dell reports final results Thursday.
While Hurd, 49, spent the past year eliminating jobs to bring his company's cost-structure in line with its rival, Dell CEO Kevin Rollins said last week he plans to spend more to boost customer service and product quality. Dell said it also plans to cut prices to court customers.
"Things are changing so dramatically," said Jane Snorek, who helps manage $110 billion including Hewlett-Packard shares at US Bancorp Asset Management in Milwaukee. "In the space of nine months, leadership switched from Dell to HP, due mostly to the new CEO, Mark Hurd."
"We really focused on trying to improve the fundamentals of our business," Hurd said.
on a conference call with reporters. "Even though we gained share in the quarter, that's not our sole objective. Our objective is to run a better business."
PC sales rose 9.5 percent to $6.98 billion on a 16 percent jump in shipments. Earnings in the business surged to $248 million from $147 million, widening the profit margin to 3.6 percent from 2.3 percent a year ago. That's just shy of the four-year high achieved in the first quarter.
Hewlett-Packard also leaned on its network of more than 140,000 retailers to help sell systems, especially laptops. Sales of notebook PCs rose 27 percent, outstripping desktop systems, which posted 1 percent growth.
The retail connection probably contributed to a 16 percent jump in U.S. PC shipments at Hewlett-Packard in the calendar first quarter, according to IDC in Framingham, Mass. Shipments at Dell, which sells direct through its Web site and telephone orders, were little changed, IDC said.
That marked the first time in a decade that shipment growth at Dell, which nabbed the market lead from Hewlett-Packard in 2001, was less than 5 percent.
The printing unit remained Hewlett-Packard's main profit engine, driven by orders for printing supplies such as ink Hewlett-Packard sold 12 million printers last quarter. Profit margins widened to 15.5 percent from 12.7 percent a year ago. That exceeded Hurd's promise of 13 percent to 15 percent. Hurd said Tuesday that range remains "appropriate" for the business and that company isn't "trying to lead a pricing war" as it adjusts pricing to win sales.
Sales of supplies such as ink rose 9.9 percent and accounted for 59 percent of printing sales. More printer customers may translate into higher sales of supplies. Companies often sell devices at a loss to win buyers for more profitable-supplies such as ink and toner cartridges.
Rochelle Garner in San Francisco and Charlie Pellett and Phil Gregory in New York contributed to this report. | 
RETURN TO TOP
