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HP's Q3 profit rises, shares follow

Slow and steady wins the race

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Shares of HP soared to a new 52-week high during the after-hours trading that followed the company's release of third quarter financial results. As has become the case under new CEO Mark Hurd, HP beat out profit expectations and turned in solid revenue gains.

HP continues to put the sex appeal back in cutting-costs - at least if you're an investor in the company. It reported a ho-hum five per cent rise in revenue to $21.9bn and an astonishing profit surge from $100m in the same period last year to $1.4bn. That left HP with an earnings per share figure of 48 cents - up from 3 cents last year - and embiggened investors.

Shares of HP jumped more than 6 per cent during after-hours trading to $36.50, at the time of this report. That figure beats out HP's previous 52-week high of $34.52. Shares of HP had languished below the $20 mark before Hurd took over.

Previous CEO Carly Fiorina would often celebrate good quarters with parade preparations and vague talk about how well her team had done. New chief Hurd uses a more modest form of cheerleading hokum.

During conference calls with press and analysts, Hurd talked about "not rolling the perfect game" and said HP has plenty of work ahead of it. The company has "lever pulling" to do and things to "grow and attach" to.

Most analysts cheered HP's quarter, although a couple questioned the revenue figure. The five per cent rise marks HP's lowest growth total since Hurd took over, and the company has not promised more robust growth in the future.

A lot of HP's financial gains under Hurd have come as a a result of cost-cutting measures such as trimming real estate and data center costs. HP also fired more than 10,000 staff on Hurd's watch.

One wonders how impressive HP's results will look once many of the one-time savings measures pass.

In the near-term, however, it's hard to knock HP's performance.

The company's flagship printing unit reported 5 per cent revenue growth to $6.2bn and a profit of $884m. HP's PC sales rose 8 per cent to $6.9bn, and the PC unit produced a $275m profit.

The company's big-iron did well too with sales increasing 3 per cent year-over-year to $4.1bn. Storage and x86 server sales were strong, while HP's RISC sales dropped off. Itanium server sales increased 76 per cent. This unit posted a $296m profit.

The only mediocre performance was turned in by HP's services team. Sales rose 1 per cent to $3.9bn and the unit provided a profit of $364m.

The software biz revenue rose 30 per cent to $318m and handed in a profit of $13m. Software revenue will be much higher once HP's closes its purchase of Mercury Interactive.

These results look very consistent when compared to recent figures turned in from IBM and Dell.

HP is looking for fourth quarter revenue of $24.1bn and earnings per share between 57 cents and 59 cents. ®

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