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November 20, 1995

MARGINS WEAKEN, SO STORMING HEWLETT-PACKARD FIGURES FAIL TO PLEASE MARKET

By CBR Staff Writer

Hewlett-Packard Co’s fourth quarter and year-end figures may have looked superb, coming in as they did well above analysts’ expectations, but Wall Street was still not impressed and the shares fell $2.75 to $90.25 on the announcement. Problem was that gross margins were lower than expected. Hewlett reported fourth-quarter earnings of $1.29 a share, up from $0.92 a year ago, where according to Reuter, analsyts’ consensus was $1.26. The company says orders for the fourth quarter were $8,800m, up 27% over a year ago. US orders grew 26% to $4,300m while international orders rose 29% to $4,500m. All the computer products did their stuff, and the company cited strong demand for personal computers, HP-UX multiuser systems and HP DeskJet printers as contributing significantly to order growth. In the computer business, orders rose 28% to $7,000m. The test-and-measurement business did even better, with order growth of 31% for the quarter over a year earlier – semiconductor test, communications test, consulting and services, and digital test products all did very well, the company said. And medical product orders rose 34% over a weak year-ago period. Analytical products were a let-down, growing 8% over the year-ago period, as were electronic components, up just 1% as the company continued its shift away from the external market for application-specific integrated circuits to meet strong internal demand. As for the margins, cost of goods sold last quarter was 65.3% of net revenue, against 62.2% in the year-ago period and 63.4% in the third quarter of fiscal 1995. Hewlett blames a higher percentage of personal computers and printers in the company’s revenue mix, pricing pressures in many businesses, currency effects, and the costs associated with numerous product transitions.

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