HP’s profits spike on overseas growth

May 21, 2008, 1:47 AM UTC

By Michal Lev-Ram

Growing overseas demand for personal computers and printers helped Hewlett-Packard’s profits rise 16% in its second fiscal quarter.

The tech giant held its earnings conference call with analysts Tuesday, after issuing preliminary results last week following its announcement it would acquire  technology services company Electronic Data Systems for $13.9 billion.

Though there were few surprises Tuesday, analysts looked to HP (HPQ) chief executive Mark Hurd for more “color” on the company’s recent growth and what EDS could mean for its future.

The company earned $2.06 billion, or 80 cents per share, in its second quarter, up from a profit of $1.76 billion, or 65 cents a share, in the year-ago quarter. Excluding one-time items, Palo Alto-based HP earned 87 cents per share, ahead of Wall Street’s expectations of 85 cents per share. Revenue, meanwhile, rose 11% to $28.3 billion, also slightly higher than the $28.1 billion analysts had projected.

HP’s operating profit margin grew to 10% in the second quarter, up from 9% a year ago.

Most of that growth was spurred by overseas demand for the company’s laptops, printers and other products. North American sales  grew just 4% from last year. About 70% of HP’s revenue is now generated in countries like Brazil, Russia, India and China.

That broad international footprint is one of the reasons HP is well-positioned in a  recession to “weather the storm better than most,” according to Shaw Wu, an analyst with American Technology Research.

The company’s performance in the U.S. market, which HP chief executive Mark Hurd called “flatish,” tells a different story.

“The U.S. was just spotty,” Hurd told analysts during Tuesday’s conference call. “I wouldn’t describe it as all bad but I wouldn’t describe it as all good either.”

Hurd also tried to soothe investors’ concerns that the acquisition of EDS could slow growth by saying that HP would “get the cost right.”

Since news of the EDS deal broke last Monday, the company’s stock has dipped about 6%.