- Associated Press - Monday, November 22, 2010

SAN FRANCISCO (AP) - Hewlett-Packard Co. on Monday reported a 5 percent jump in net income driven by corporate spending that was offset by weak consumer demand, reflecting the industry’s lopsided recovery.

The world’s biggest technology company also raised its profit forecast for the new fiscal year. The numbers were posted after the market closed and HP’s shares rose in after-hours trading.

Purchases by big companies are buoying growth. They have thawed budgets that were frozen during the depth of the recession. Meanwhile, unemployment worries have sapped consumers’ appetite for computers, and state governments in the U.S. have slashed spending to plug budget holes.

Other technology major leaguers, such as Cisco Systems Inc. and Intel Corp., have issued warnings.

HP said its net income was $2.54 billion, or $1.10 per share, in its fiscal fourth quarter, which ended Oct. 31. That was up 5 percent from $2.41 billion, or 99 cents per share, last year.

Excluding items, the company earned $1.33 per share, topping the $1.27 per share that analysts polled by Thomson Reuters were expecting, excluding items.

Revenue was $33.28 billion, an 8 percent increase over last year. Analysts expected $32.75 billion.

The higher guidance calls for profit of $5.16 to $5.26 per share for the fiscal year ending in October 2011. The previous forecast was $5.05 to $5.15 per share.

The higher figures include a gain of 4 cents per share from real estate sales.

HP’s earnings conference call marked the first chance for investors and analysts to hear from the company’s new CEO, Leo Apotheker, since he started the job three weeks ago.

He takes over the company as it’s in mid-stride in a radical makeover. Mark Hurd, HP’s former CEO, was spending billions of dollars in acquisitions to make the company less of a one-trick pony that was dependent on printer ink for most of its profits, before he was ousted in the wake of a sexual harassment investigation.

Apotheker identified software and research as some of the areas he will focus on as CEO.

Building or buying better software would close a gap that exists between HP and IBM Corp. Pouring more funds into research will help HP tamp down a frequent criticism of the Mark Hurd years, in which research was among the areas clipped in broad cost-cutting.

Apotheker also is trying to win over HP’s workers.

He is restoring the vast majority of employees’ salaries to their levels before an across-the-board cut that Hurd implemented in February 2009. The amount of the cut varied depending on job function. HP is also proposing a program that would allow employees to buy HP shares at a five percent discount.

Shaw Wu, an analyst with Kaufman Bros., said he thought Apotheker handled the call “pretty well considering he’s only been CEO for a short period of time.”

“The best thing he can do, which he is already doing, is to visit the company’s customers and its employees to get a feel of what they want and the main issues,” Wu said. “It’s similar to what Mark Hurd did when he started.”

Wu pointed to the uptick in HP’s stock price as evidence that many investors were comforted by the numbers and Apotheker’s message.

HP’s results illuminate trends in multiple markets. It’s the world’s top PC seller, and reported that revenue from consumer PCs fell 10 percent in the latest quarter while business PCs rose 20 percent. That was a reversal of the trend during the recession, when consumers snapped up inexpensive “netbooks.”

Meanwhile, servers and data storage technologies are moving fast. HP’s revenue in that business-focused category rose 25 percent. HP is among the top sellers in both categories.

Recent forecasts from other technology heavyweights have painted a cloudy picture.

Intel warned about consumer interest in PCs heading into the holidays.

An unexpectedly weak outlook from Cisco dragged down the stock market earlier this month. It raised fears that lackluster government spending would spread beyond Internet infrastructure, which is Cisco’s specialty and an area HP has moved aggressively into.

HP’s chief financial officer, Cathie Lesjak, said that HP is less vulnerable to swings in government spending because the public sector is only 10 percent of its business and is made up mostly of long-term services contracts.

HP shares rose $1.30, or 3 percent, to $44.55 in extended trading, after the results were reported. The stock had risen 76 cents, or 1.8 percent, to $43.25 at the end of regular-session trading.

The stock is still trading below its levels at the time of Hurd’s departure. It is down 7 percent, a decline that has wiped out $10 billion in shareholder wealth.

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