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December 1999

Strong HP Q4 report lifts stock; Unix sales down while HP profits up

Hewlett-Packard reported a 10-percent increase in revenues for the last quarter of its fiscal year, which ended on Oct. 31, results that helped the company’s stock price climb into the mid-90s.

HP reported its first set of results without the operations of its Agilent test and measurement business spinoff, and finished the full fiscal year at $42.3 billion in sales. The total figure covers only HP’s computer and imaging (printer) business, and is up 7 percent from fiscal 1998 sales totals. Net profits of $3.49 billion were up 19 percent over last year’s computer and imaging totals.

HP pointed to its strong performance in PCs and printers as the key to its fiscal strength in the period. Company CFO Bob Wayman said that Unix server sales — the only enterprise product line identified in analyst briefings — were “flat compared to Q4 last year. The mid-range K- and N-class was down slightly due to softness in North America. However, growth in Asia-Pacific was excellent for the N-Class.”

The day after HP announced its profitability results — it beat analysts’ estimates by a few cents per share — its stock climbed from the low $70s to above $90 a share, where it remained at presstime. Analysts said HP’s stock also seemed to be lifted by the IPO of Agilent, offered on the same day as the HP Q4 report. Agilent climbed from an initial offering of $30 to above $42 on its first day of trading, delivering $1 billion more in funding than expected from the IPO.

CEO Carly Fiorina said HP responded to her call for action in the last month of the quarter. She also announced that HP has begun to implement “a pay philosophy that sets goals for revenue growth, profit growth and total shareholder returns measured against our strongest competitors. That comparison to our strongest competitors and to external standards is key, to my thinking. The top 100 leaders in the company will see this philosophy go into practice right away. The rest of the company will see a phased-in approach over the coming quarters.”

Fiorina also said that as HP moves away from decentralized organization, it expects to cut costs. The money saved will go into R&D and field-level sales, she explained. The CEO added that other than the V-Class Unix systems, “the rest of our server lines, including NT, were essentially flat. On the other hand, order growth in all server lines picked in October, and that trend is continuing.”

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Ron Seybold, Editor In Chief

 


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