Let by strong sales in laptops, and the ongoing demand for printer ink, Hewlett-Packard (HPQ) performed strongly in the fourth quarter, exceeding all expectations.
While it's no surprise that printer ink continues to be the most profitable product as Hewlett-Packard, strong laptop sales led them to a strong fourth quarter, although the company says they can't expect sales to grow that fast on an ongoing basis.
Net income for HP grew by a solid 28 percent for the quarter ending October 31, increasing from $1.69 billion, to $2.16 billion, equaling 81 cents a share. When excluding one-time charges, the company's profit was 86 cents a share, four cents above the average estimate.
Company sales of laptops surged by 49 percent over last year to reach $5.16 billion, while Desktop sales grew by 15 percent to end at $4.21 billion.
These sales help increase their position as the No. 1 PC seller in the world, now 5 percentage points ahead of Dell (DELL), with 20 percent of the market. Dell has fallen to 15 percent of market share.
Even with the strong computer sales of the company, the bread and butter of its profits still remains its Imaging and Printing Group, which sells printer ink, and which accounted for 42 percent of the operating profits for the quarter. That's almost twice as much as their Personal Systems Group, which sells the PCs.
That shows how strong the printer ink division is when you consider its position in the company, while computer sales increased so much.
The overall fiscal year ended with sales of $104.3 billion, a 14 percent increase from last year, and the first time ever it has reached the $100 billion mark in annual sales. Net income finished the year at $7.26 billion, or $2.68 a share.
HP guidance after excluding one-time charges was for 80 cents a share the first quarter. Sales are projected to reach between $27.4 billion and $27.5 billion; higher than the estimated $27 billion analysts were expecting.
Speaking to concerns about the possible exposure HP has to the mortgage problems, CEO Mark Hurd responded saying only a small portion of the company's business comes from the financial services sector. He added though that he feels the sector is actually an opportunity for the company saying, "We're actually trying to get more exposed to financial services_ we see that as a big opportunity for us."
In the belief the company is undervalued, the board of HP authorized another $8 billion for stock buybacks.
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