Hewlett-Packard Co managed to eke out some growth on its top and bottom line for the recently-completed third quarter, posting net income up 1% at $621m on revenue up 5% at $10.98bn, or $0.58 per share. The Palo Alto, California company, which last month warned that the quarter’s net income would be flat or slightly down from the $0.58 per share in the year-ago period, beat revised Wall Street estimates of $0.54. Before July’s sneak preview, analysts surveyed by First Call had been expecting $0.62. HP admits it was disappointed with the quarter’s numbers, which it blames largely on a difficult pricing environment and the Asian economic crisis. But it says it was pleased to record some revenue and earnings growth and has made progress on inventory levels – recently a more serious problem for the company – which stood at 14.5% of revenue, compared with 15.6% in the year-ago quarter. For the nine-month period, net income slipped 3% to $2.24bn on revenue up 12% at $34.8m. Earnings per share fell 5% to $2.09. US revenue for the quarter was $5.2bn, up 9% year-over-year, while revenue from Europe was $3.6bn up 7% in US dollars and 11% in local currency. But in the Asia-Pacific region, revenue declined 13% in dollars, and was flat in local currency. Total orders for the quarter were $10.5bn, up just 1% over the year-ago period. Orders in the US grew 4% and foreign orders slipped 1%, with Asia- Pacific orders down 19%. On the whole, HP says currency effects reduced overall revenue and order growth by about 4 percentage points. Net revenue in the computer business increased 6% to $9.2bn, with orders up 2% at $8.6bn. Revenue in the PC business was flat due to the continuing pricing pressures and a mix shift to the low end. Vectra corporate PCs saw a slight revenue decline, while Brio PCs posted strong revenue growth and OmniBook notebooks had a decent quarter. Pavilion home PCs posted modest revenue growth – slowed in part by the timing of the release of Windows 98, the company says. Revenue for Kayak Workstations declined significantly compared with a strong year-ago quarter. The server business saw a moderate increase in revenue. HP said Unix systems saw revenue growth in the high-end and mid range, but revenue for low-end Unix system servers fell off, which is also being blamed on Asia and a strong year-ago quarter. Operating expenses for the quarter rose 4% and were 24.6% of net revenue, compared with 24.7% in the same period last year and 24.5% for the prior quarter. Looking ahead HP feels that continued caution is in order, as the Asian situation doesn’t look to improve any time soon. The company also cites worries about macro economic conditions in the US and in Latin America, as well as continued pressure from the competition. Analysts are expecting $0.77 per share in the fourth quarter, a slight improvement over last year’s $0.75.
