HP sets revenue record in Q2

More than just a printing face

By Ashlee Vance, 18th May 2004

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Solid sales across its major product lines pushed HP to a tidy second quarter.

HP pumped out $20.1bn in revenue during the period - a 12 percent year-over-year rise and a record for the company. The second quarter profit came in at $1.1bn, which was a 77 percent rise over the same period last year. In last year's Q2, HP booked $234m in restructuring charges and $126m in acquisition-related charges.

"HP delivered a strong quarter with solid revenue gains and continued profitability across the portfolio," said Carly Fiorina, CEO at HP. "We surpassed $20 billion in quarterly revenue for the first time in our history, with record second quarter revenue in PCs, enterprise hardware, software, services and imaging and printing. Cash flow from operations totaled $2.6 billion. These results demonstrate that we are winning and growing across the portfolio in an intensely competitive market."

True enough, HP enjoyed year-on-year revenue growth of 17 percent in its personal computing business, 15 percent in services, 11 percent in imaging and printing, 8 percent in servers and storage and 23 percent in software. The gains, however, are less impressive when viewed in constant currency. Total second quarter revenue for all categories only rose 4 percent taking currency adjustments into account.

The effect of currency is clear when breaking down HP's performance on a regional basis. HP grew but 4 percent in the Americas during the second quarter. By contrast, HP grew much faster in Europe - 17 percent - and Asia Pacific - 22 percent.

The best marker for HPs' health came from its ability to generate a profit in all of its major businesses. This is the third quarter in a row that HP has been able to have its server/storage and PC businesses join printing and imaging in the black.

Still, the inkers have Fiorina's heart.

"Our imaging and printing business continues to set revenue and profit records . . . even as we become less reliant on (imaging and printing) as the profit driver for the company as a whole," Fiorina said, during a conference call with analysts.

HP's Technology Solutions Group, which includes servers, storage, software and services, posted a profit of $400m in the quarter - up $108m from last year's Q2. The personal computing unit managed a profit of $45m - up from $23m last year. Imaging and printing produced a whopping $953m in profit - up from $925m last year.

So, while Fiorina paints a pleasant non-printing story, it's really the IPG group that still pays the vast majority of the bills at HP. This may not be a good thing if you consider that IPG revenue rose 11 percent but profits barely moved.

HP, however, is confident about the road ahead. It raised second half of 2004 revenue estimates to between $39.7bn and $40.7bn. Analysts had been looking for revenue to come in at the low end of that estimate. ®