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May 20, 2008 4:07 pm US/Pacific
2nd Quarter Profit Climbs For Hewlett Packard
PALO ALTO (AP) ―
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Hewlett Packard Headquarters
Strong demand outside the United States for Hewlett-Packard Co.'s computers, printers and other products widened its profit margin in its second quarter, but investors worry the trend will break as HP digests Electronic Data Systems Corp. this year.
The results released Tuesday came as no surprise because HP provided a snapshot of its latest quarterly earnings and revenue last week when the Palo Alto-based company jolted investors with its planned $13.2 billion acquisition of technology services specialist EDS.
The deal has raised concerns that Plano, Texas-based EDS will cause more trouble to HP than it's worth and slow the financial momentum building at HP since it hired Mark Hurd as chief executive a little over three years ago.
Echoing remarks from a week ago, Hurd assured reporters Tuesday that the acquisition will pay off.
"Make no mistake about it: We will get the cost right and we will create value for shareholders," Hurd said during a conference call.
In its second quarter, which ended in April, HP earned $2.06 billion, or 80 cents, per share. That represented a 16 percent increase from a profit of $1.76 billion, or 65 cents per share, at the same time last year.
Revenue rose 11 percent to $28.3 billion.
Excluding acquisition costs, HP said operating profit margin rose to 10 percent in the second quarter, up from 9 percent a year ago.
HP also reiterated an improved outlook that it gave a week ago.
But the solid second-quarter performance and upbeat forecast for
the rest of the year so far haven't been enough to fully restore the erosion in HP's stock price since news of the EDS deal leaked out.
HP shares are down about 6 percent since then, compared to a slight uptick in the Dow Jones industrial average, which includes HP as component.
HP shares fell 25 cents to finish at $46.46 Tuesday, then shed another 24 cents in extended trading.
The breakdown released Tuesday provided more insights about the factors propelling HP's growth.
Like several other large technology companies, HP's international diversity is helping to offset the debilitating effects of the U.S. economy's weakness. Markets outside the United States accounted for 70 percent of HP's revenue in the second quarter.
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