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H-P Shows Strength

The company blows away earnings estimates and puts a bullish outlook on the rest of its fiscal year.

Updated from 5:08 p.m. EST



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grew its bottom line roughly 28% in its fiscal fourth quarter, racing past Wall Street estimates on the back of strong worldwide demand for notebook PCs.

The Palo Alto, Calif., technology giant said sales in the quarter ended Oct. 31 totaled $28.3 billion, compared with $24.5 billion at this time a year ago. Analysts polled by Thomson Financial were looking for $27.4 billion in revenue.

The nearly $1 billion in revenue upside was the result of favorable foreign currency effects, H-P said.

But H-P had plenty of legitimate growth in its various businesses to celebrate during the quarter.

Sales in Brazil, Russia, India and China -- the so-called BRIC countries -- jumped 37% year-over-year, according to H-P. Worldwide notebook PC revenue grew 49% from this time last year.

"The world is moving to mobile," said CEO Mark Hurd in a post-earnings conference call with the media. He pointed out that the laptop is the main device used to access the growing amount of online content in many parts of the world.

At the same time, H-P is benefiting from falling prices of PC components like DRAM memory chips. Hurd said that favorable component prices contributed to part of the upside the company experienced in its profit margin during the past quarter.

And H-P's software business nearly tripled its operating profit year-over-year to $177 million, as the company benefitted from its acquisition of Mercury Interactive.

H-P's improved its operating margin to 9.3% in the fiscal fourth quarter, compared to 7.7% at this time last year.

H-P earned $2.16 billion in net income, or 81 cents a share, vs. net income of $1.69 billion, or 60 cents a share at this time last year.

Excluding 5 cents in charges, primarily due to the amortization of purchased intangible assets, H-P said it earned 86 cents a share. On that basis, analysts were expecting 82 cents EPS.

Shares of H-P were recently up 96 cents, or 1.9%, to $50.40.

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in delivering strong financial results thanks to the ongoing strength in the consumer PC market.

But rising energy prices and the effects of the subprime mortgage meltdown have raised fears that H-P might not escape a broader economic slowdown, particularly if the large corporations that account for roughly a third of H-P's revenue cut back on capital spending.

H-P's Hurd would not comment on macroeconomic trends during the conference call. But he said that H-P has seen no change in consumer spending in the financial services industry, while stressing that H-P was not as exposed to the financial sector as others.

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spooked investors when it warned of a slowdown in orders from financial services firms, many of which are writing off billions of dollars of mortgage-backed securities.

H-P projected that revenue in the current quarter will range between $27.4 billion and $27.5 billion with adjusted EPS of 80 cents. Wall Street was looking for $26.9 billion in revenue with 77 cents adjusted EPS.

And H-P said that revenue for the full 2008 fiscal year will increase 7% to $111.5 billion, with adjusted EPS of $3.32 to $3.37. Analysts polled by Thomson Financial were looking for revenue of $109.5 billion with $3.27 in EPS.

The company also announced that its board approved the authorization of an additional $8 billion for share repurchases to manage dilution created by employee stock plans.