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HP Soars as Sales Surprise (Update 2)

This story has been updated with HP conference call commments on China and Dell, as well as additional outlook information.

NEW YORK (The Street) - HP (HPQ - Get Report) blew past Wall Street's estimates in its fourth-quarter results, as the PC maker avoided the spending pressures that weighed on rivals Cisco (CSCO) and IBM (IBM)

The PC maker reported sales of $29.1 billion, down from $30 billion in the prior year's quarter, but comfortably above analysts' forecast of $27.91 billion. 

Excluding items, HP earned $1.01 a share, down from $1.16 a share in the same period last year. Analysts surveyed by Thomson Reuters were looking for earnings of $1 a share. 

"Through improved execution, strong cost management, and with the support of our customers and partners, HP ended fiscal 2013 on a high note," said Meg Whitman, HP president and chief executive officer. "Our Q4 results demonstrate that HP's turnaround remains on track heading into fiscal 2014."

Must Read: HP Will Feel Tech's Spending Pain

HP's Personal Systems revenue was down 2% compared to the prior year's quarter, while Printing sales dipped 1%. Enterprise Group revenue, however, was up 2% over the same period, while Enterprise Services fell 9%. Software sales tumbled 9% and Financial Services was down 6%. 

Excluding items, HP expects first-quarter earnings between 82 cents and 86 cents a share, at the high end of Wall Street's expectations. Analysts surveyed by Thomson Reuters were looking for earnings of 82 cents a share. For fiscal 2014, HP reiterated its non-GAAP earnings outlook of $3.55 to $3.75.

HP ended the quarter with $12.5 billion in gross cash.

Speaking during HP's conference call, Whitman said HP is making progress on its turnaround plan. "With the final quarter of our 'fix and rebuild year' now behind us, I'm pleased with our progress in 2013," she said. "In fiscal 2013, we focused on improving our operations."

CFO Cathie Lesjak described a "tough" fourth-quarter environment in EMEA, and noted a 9% full-year revenue decline in the region. Lesjak also pointed to fourth-quarter strength in India and weaker China performance across many of HP's businesses, but noted networking "continues to perform well" in the country.

Later, Citigroup analyst Jim Suva asked Whitman about the business environment in China, which has recently proved challenging for rivals Cisco and IBM. HP had flagged weakness in China last quarter, the CEO responded, but cited the recent appointment of industry veteran Robert Mao to run the company's China business. HP's China operation reports directly to her, she added.

"This will help energize our overall business in China and drive a uniform strategy," she said. "We have got the right outlook on China for 2014."

During the call, Lesjak was also asked whether the recent changes at newly-private rival Dell had caused a significant shift in the tech market's competitive dynamics. "Our expectation and the way we're planning and modeling is that this environment continues to be very competitive," she replied.

HP's board declared a regular cash dividend of 14.52 cents a share after market close.

The fourth-quarter numbers and robust guidance pushed HP's shares up 6.9% to $26.82 in extended trading.

 --Written by James Rogers in New York.

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