HP Raises Its Guidance for Fiscal Second Quarter

Published: May 10, 2007

by Timothy Prickett Morgan

This week, a somewhat jumpy Hewlett-Packard, in the wake of last year's pretexting scandal, announced that it had lifted its guidance to Wall Street for the fiscal second quarter ended on April 30.

The reason why HP made the public announcement only a week before it will actually divulge its financial results is that the company accidentally sent an internal e-mail discussing the results to a third party. There are very strict rules from the Securities and Exchange Commission forbidding selective disclosure of information to shareholders, so the company put out an announcement that said it would have revenue in the second quarter in the range of $25.5 billion to $25.55 billion, and earnings per share of 64 cents to 65 cents. That is significantly up from the $24.5 billion in guidance HP offered a quarter ago, when it also said that earnings would come in at either 57 cents or 58 cents a share.

HP attributed the roughly 4 percent increase in sales over anticipated levels--and the consequent boost in profits--to strong sales of PCs (presumably mobile PCs more than desktops, but HP was not specific) and ProLiant X64 servers (which include rack and tower models as well as BladeSystem blade servers).

In the second quarter of fiscal 2006, HP posted sales of $22.6 billion and earnings of 66 cents per share; these earnings included 15 cents per share from a favorable tax settlement, meaning the core business only delivered 51 cents per share. So HP is looking at posting a revenue increase in this fiscal year's second quarter of about 11 percent, and profits excluding that favorable settlement will be up about 26 percent.

HP also said that it expected sales for the third quarter of fiscal 2007 to be in the range of $23.7 billion to $23.9 billion, with earnings between 59 cents and 61 cents per share. That's a pretty tight range, and a decent run rate for what is often a weaker quarter for HP.

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