H-P Rediscovers PC Mojo

In a conference call with investors, Hurd attributed the PC unit's success to solid retail performance in the retail channel as well as the strength of H-P's international presence. "This hasn't been a one-quarter story," Hurd said of the PC division. "This has been a multi-quarter story and a multi-year story."

For the first quarter under way, H-P said it expects earnings before stock-based compensation expense of 46 cents to 48 cents a share, above the current First Call consensus estimate of 44 cents. The company forecast first-quarter sales $22.3 to $22.6 billion. The Street's consensus called for $22.6 billion.

In addition to the seasonal sequential decline in revenue growth expected in the first quarter, Chief Financial Officer Bob Wayman said foreign currency issues would take an additional toll on the growth rate. For the full year, the impact of currency issues will result in revenue growth between 3% and 5% to a range of $89.5 billion to $91 billion.

For the full year, H-P expects earnings before the stock expense of $1.88 to $1.95. First Call was currently calling for the company to post full-year earnings of $1.82 a share on revenue of $91.12 billion.

The company expects overall demand in 2006 to be steady, said Hurd.

H-P shares have been on the rise this year, with investors showing confidence in the leadership of Hurd, who replaced Carly Fiorina in March. Since taking the helm, Hurd has aggressively focused on cutting costs across the company. In July, H-P announced it was reducing its headcount by 10%, or 14,500 employees. That number has now expanded to a total of 15,300 workers, Hurd said, as the company has moved forward with executing its restructuring plan.

Gross margins were 23.5% companywide, just up from 23.4% in the year-ago period. Margin improvements in the server and PC divisions were offset by declines in the imaging and services divisions. And H-P's first significant employee bonus payout in years also prevented margins from expanding.