HP enterprise sales pickup stirs turnaround hopes

Tue Nov 26, 2013 6:44pm EST
 
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By Poornima Gupta

SAN FRANCISCO (Reuters) - Hewlett-Packard Co beat revenue 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.

Wall Street had low expectations for HP following a disappointing third-quarter performance, and after rivals like International Business Machines Corp and Cisco Systems Inc had reported poor results.

The pickup in enterprise hardware revenue in the fiscal fourth quarter - coming after a 9 percent slide in sales from the same division in the previous three months - helped shore up confidence in Whitman's turnaround effort.

"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 and Cisco," 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.

But the company's operating margins eroded. Non-GAAP operating margin slipped to 9 percent in the quarter from 10.4 percent a year earlier, reflecting aggressive competition from rivals such as Dell Inc and Lenovo Inc.

Whitman, who took the helm of the world's largest PC maker more than a year ago, is trying to wean the Silicon Valley icon off sales of personal computers. Last month, she told Wall Street she expects revenue to stabilize in 2014, with some areas of growth for the company.   Continued...

 
Meg Whitman, chief executive officer and president of Hewlett-Packard, speaks during the grand opening of the company's Executive Briefing Center in Palo Alto, California January 16, 2013. REUTERS/Stephen Lam