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HP redeems pride with strong Q4

Billion dollar printer profit steadies the ship

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HP delivered a solid fourth quarter when it needed it most, posting gains in all of its major businesses and reversing the effects of ordering system problems that plagued it one quarter earlier.

HP stormed into the fourth quarter looking for redemption. The company's server and storage businesses took major hits in the third quarter when an ordering system collapsed and disrupted sales to numerous customers. The operational problems overshadowed an otherwise decent quarter. This time, there were no internal collapses to dampen a nice fourth quarter performance.

"Despite the challenges of the third quarter, we made solid progress on many fronts during the year," said CEO Carly Fiorina, during a conference call that discussed HP's performance.

In the fourth quarter, HP reported revenue of $21.4bn - an 8 percent year-over-year increase. It also reported an operating profit of $1.29bn versus $1.07bn in the same period last year. Over the full year, HP posted revenue of $80bn in fiscal 2004, which compares to $73bn in 2003. HP showed net earnings of $3.5bn in 2004, which compares to $2.5bn in 2003. In it most recent quarter, HP benefitted from the obvious corrections made to its server ordering system, a weak US dollar and an healthier overall corporate spending climate.

"I think, at this juncture, what we are seeing is an improving enterprise market, and, you know, a so-so consumer market," Fiorina said. "I wouldn't call (the consumer market) weak, but I wouldn't call it spectacular."

HP's ESS (Enterprise Storage and Servers) business, which oscillates between the red and the black, landed in the black this quarter. The group reported revenue of $4.1bn, which is a 7 percent year-over-year rise. Intel and AMD-based server revenue jumped 16 percent and Unix/Itanium server revenue rose 3 percent. Storage revenue remained down, falling 9 percent. Overall, the unit managed to post a $107m profit.

HP's much-envied Imaging and Printing business pulled in $6.5bn in revenue - a 5 percent year-over-year rise. The unit produced a stunning $1.1bn profit.

HP's PC group reported a 9 percent rise in revenue to $6.5bn and a profit of $78m. The software unit posted revenue of $277m with a 25 percent improvement in sales an a loss of $5m. HP's services business grew 13 percent to $3.7bn with a $367m profit.

HP expects first half 2005 revenue to come between $41.8bn and $42.3bn.

Investors rewarded HP for its fourth quarter performance by sending shares up 8 percent, at the time of this report, in the after-hours markets. ®

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