HP quarterly revenue beats, shares jump

By Poornima Gupta

SAN FRANCISCO (Reuters) - Hewlett-Packard Co's (NYS:HPQ) revenue beat forecasts as sales growth in its enterprise group inspired cautious optimism about the company's turnaround plan, and its shares rallied more than 7 percent.

Revenue from the sprawling enterprise group, which Chief Executive Meg Whitman is focused on expanding as personal computer sales crumble globally, climbed 2 percent, aided by a 10 percent rise in server sales and 3 percent growth of the networking business.

"We have more to do on the margins but we are happy," Whitman said in an interview. "We had a good quarter in networking, particularly in China and in Europe."

HP faced an aggressive pricing environment and a tough global economy but there were "some bright spots in Asia and in some of our emerging markets," she added.

Overall, the company posted revenue of $29.1 billion, beating the $27.9 billion expected by analysts, according to Thomson Reuters I/B/E/S.

Non-GAAP net earnings fell 14 percent to $2 billion in the quarter or $1.01 per share, versus the $1.00 analysts had expected on average.

Revenue fell across most of HP's business divisions except the enterprise group, whose sales edged up to $7.6 billion. Sales from HP's largest, PC-focused unit slipped 2 percent to $8.58 billion while the printing division's sales dipped 1 percent to $6.04 billion.

The pickup in enterprise hardware revenue revived confidence in HP's turnaround plan, analysts said.

"I saw better than expected performance out of the enterprise group, which we expected to be weak given the results from peers such as IBM (NYS:IBM) and Cisco (NSQ:CSCO)," said Edward Jones technology analyst Bill Kreher. "There is some hope given that the company was able to jump over what was admittedly a pretty low hurdle."

He cautioned, though, that any signs of a turnaround will remain uneven.

Whitman, who took the helm of the world's largest PC maker more than a year ago, said last month she expects revenue to stabilize in 2014, with some areas of growth for the company.

With the help of job cuts and expansion into markets and areas with longer-term potential such as enterprise computing services, the CEO is trying to reconfigure the Silicon Valley icon and return it to growth.

Shares in HP climbed to above $27 in extended trading, from a close of $25.09 on the New York Stock Exchange. (Reporting by Poornima Gupta; Editing by Richard Chang)