Features

SAN JOSE — Hewlett-Packard Co. shares rose 9 percent Wednesday after the high-tech giant’s fourth-quarter earnings beat analyst estimates, possibly strengthening the company’s hand as it tries to win support for its $23.7 billion acquisition of Compaq Computer Corp. 

In the three months ending Oct. 31, HP earned $97 million, or 5 cents per share, down 89 percent from its profit of $922 million, or 47 cents per share, in the same period last year. 

Revenue fell to $10.9 billion in the quarter from $13.3 billion a year ago, but that was up from the third quarter’s $10.3 billion. 

Excluding one-time gains and losses, HP reported earnings of $361 million, or 19 cents per share. Analysts surveyed by Thomson Financial/First Call were expecting earnings excluding one-time events of 8 cents per share, on revenue of $9.9 billion. 

Several analysts said the results were excellent, considering the bad economy.  

Jay P. Stevens of the Buckingham Research Group said the report gives the company momentum in its bid to attract support for the Compaq deal. 

The deal has come under increasing fire, notably from sons of HP’s founders, including Walter B. Hewlett, an HP board member who has hired a proxy solicitation company that can help him fight the deal. 

HP’s largest shareholder, the Packard family’s charitable foundation, is undecided about how to vote its 10.4 percent stake. 

The earnings report did not change the opinion of David Katz, chief investment officer at Matrix Asset Advisors, which has large stakes in HP and Compaq and opposes the acquisition. Katz believes the potential benefits of the deal are outweighed by the risk that the integration will be rocky. 

He said Wednesday’s report likely would solidify chairwoman and chief executive Carly Fiorina’s support from the board and some shareholders, “because she is progressing in a difficult environment.” 

“But the flip side is that it also illustrates Hewlett would do pretty well on its own and doesn’t need the significant cloud in its future,” he said. 

HP said it had relatively good results in its services and printing businesses, though the computing side remains unprofitable. Sales all but recovered within a few weeks of the Sept. 11 terrorist attacks, though chief financial officer Robert Wayman said “big-ticket items are still a bit soft.” 

Fiorina said the company aggressively lowered inventory and expenses to deal with the economic slowdown, and was so pleased with its performance in the tough environment that it awarded nearly all employees a bonus of two days’ pay. 

“This past year has been a challenging one in a multiyear reinvention effort,” Fiorina said in a conference call with analysts. “While we’ve made solid progress on many fronts in an extraordinarily difficult environment, we know there is more work to do.” 

The results were announced before the stock market opened. HP shares rose $1.85 to $22.08 Wednesday on the New York Stock Exchange. The stock, which closed at $23.21 on Aug. 31, the last day of trading before the Compaq deal was announced, had fallen as low as $12.50 since then. 

Compaq shares were up 14 percent, or $1.20 a share, at $10.00 on the NYSE. 

Reaffirming her support for the Compaq deal, Fiorina said it would greatly improve HP’s product lineup for business customers, create new services opportunities and lower the company’s costs in key areas. 

“We don’t have the luxury of an incremental approach,” she said. “We need to take a bold step.” 

Wayman, who is also an HP board member, acknowledged in an interview that Compaq’s disappointing recent results have made reaction to the deal more negative than management had expected. Compaq lost $499 million and had a 33 percent drop in revenue in its quarter that ended Sept. 30. 

But Wayman said he sees signs Compaq’s business improved in October. He reiterated his belief the deal can immediately add to HP’s bottom line, especially by eliminating redundant costs. 

Palo Alto-based HP took a restructuring charge of $282 million in the quarter to account for 6,000 job cuts announced in July. About 4,100 of those employees have already left the company. 

HP did not provide specific guidance for fiscal 2002, saying the company is not counting on an economic recovery. In the current quarter, revenue is expected to drop slightly from the fourth quarter, and margins are expected to be about flat because of an “intensely competitive environment,” Fiorina said. 

For all of fiscal 2001, HP showed net income of $408 million, or 21 cents per share, on revenue of $45.2 billion. The net income figure was $272 million lower than it would have been had HP not restated its first three quarters’ results to reflect a change in accounting procedures. 

Those yearly marks all were off fiscal 2000’s results of $3.7 billion in net income, $1.80 a share, on revenue of $48.8 billion. 

——— 

On the Net: 

http://www.hp.com