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Tech Industry

HP beats the Street

Hewlett-Packard reports net revenues of $12.2 billion for the fourth quarter, 4 percent greater than the same period a year ago.

Hewlett-Packard beat Wall Street's expectations by a nickel for the fourth quarter of fiscal year 1998.

HP reported today a net income of $710 million for the quarter ending October 31, 12 percent less than the $806 million net income from the like quarter a year ago. Excluding the $170 million in special charges, though, that translates to earnings of 79 cents per diluted share, 5 cents above analysts' expectations of 74 cents a share, according to First Call.

HP has cut its expenses dramatically, but relatively weak sales meant the company hasn't seen much financial benefit from those changes, said Robert Wayman, HP's chief financial officer, in a conference call today. "We had a pretty good profit outcome that could have been much stronger if growth had been robust," Wayman said. "Restoring growth is clearly a key challenge for us in the months ahead."

Although sales in North America and Europe are strong, the economic problems in Asia and to a lesser extent Latin America continue to be a problem for HP. Partly as a result, earnings per share for the first quarter of fiscal 1999 probably will be below the first quarter of fiscal 1998, executives said. That's partly because of a "tough comparison:" Last fiscal year, revenues from Asia grew 8 percent over the year before, performance that will be hard to match this fiscal year.

HP's international presence accounts for 53 percent of its revenue, so it's not surprising that HP executives are keeping an eye on it.

But overall, HP executives believe the company is in a good position for growth, an opinion some shared.

"The PC business has clearly turned,'' said analyst John Jones of Salomon Smith Barney, who expected earnings of as much as 78 cents and rates the stock "buy."

HP reported a 7 percent gain in revenue from its computer business compared to the fourth quarter of 1997, fueled by an "excellent" increase in sales of HP's Pavilion line of home computers and midrange Intel-based NetServer machines. HP was helped by the fact that the average selling price of a Pavilion didn't change.

Although sales of HP's Vectra and Brio commercial desktop computers and of its OmniBook portable computers increased, price cuts neutralized much of the revenue.

Sales of HP's printers likely will pick up with new products just introduced and strong orders in North America and Europe.

However, Unix server revenue dropped, Wayman said. But that could change with the addition of Unix servers based on HP's latest chip, the PA-RISC 8500.

Bloomberg contributed to this report.