Enterprise servers
show good profit in Q2;
HP reports strong earnings

Hewlett-Packard’s second quarter report for fiscal 1999 showed good profits in its enterprise server business, although Unix server revenues for the quarter fell from last year’s Q2 totals. The company reported a $918 million profit for the period ending April 30, but its revenue growth has all but stopped in fiscal 1999.

HP’s report showed that revenues are up only two percent over last year’s numbers during the first half of its fiscal year, which ends on October 31. Orders were much stronger for the second quarter, giving analysts some hope for revenue increases in months to come. The new N-class servers, scheduled for first delivery to HP 9000 customers this month and rollout for HP 3000s sometime in 2000, won’t be shipping until this month, and so had no impact on the Q2 revenue figures.

HP financial chief Bob Wayman said the company has now beaten analysts’ projections for profits in three straight quarters. “We also met or surpassed our own expectations in most elements of our performance,” he said. “We achieved these results while working on the realignment of HP into two separate companies. I think this shows that our basic strategy for creating two companies is working.”

Orders for HP products increased 10 percent over last year’s Q2, which Wayman noted was the best increase in orders over the last year. Asian HP business had a record quarter for orders, indicating a rebound in that troubled spot of HP’s business.

Over the first six months of fiscal 1999, HP has basically matched 1998 sales, recording $24.3 billion versus $23.8 billion for last year. Its earnings per share are up 16 percent over last year’s totals, however. Wayman said that regarding profits in the segment of HP’s business that includes the HP 3000 and HP 9000s, its “enterprise systems achieved fairly good net margins despite weak midrange revenues.” High-end HP 9000 V Class systems have done well, but the rest of the Unix midrange is stalled while customers wait to take delivery of the new N-Class systems.