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posted better-than-expected results for its fiscal third quarter, driven by a spike in consumer PC demand, which was partially offset by weakness in commercial printer sales. The company also showed strong progress on its cost cutting plan and resumed an aggressive stock repurchase program.
For the quarter ended July 31, HP (ticker: HPQ) posted revenue of $14.3 billion, down 2% from a year ago, but about $1 billion ahead of Wall Street analyst expectations. Non-GAAP profits were 49 cents a share, ahead of both the company’s guidance range of 39 to 45 cents, and the Street consensus of 43 cents.
“It was a very strong quarter at both the top and bottom lines,” CEO Enrique Lores said in an interview with Barron’s. “We’re making progress on our innovation strategy in both printers and PCs.”
Revenue from the company’s Personal Systems segment was up 7% year-over-year and 25% sequentially, driven by a huge spike in notebooks, with revenues up 30% from a year ago and 44% sequentially. But desktop PC revenues were down 29% from a year ago and 9% sequentially. Commercial revenue in the segment was down 6%, while consumer was up 42%. HP shipped 18 million PCs in the quarter, a record. Overall units were up 11%, with notebook units up 32%, and desktop units down 30%.
PC demand has been strengthened by stay-at-home trends, along with a spike in purchases from school systems trying to prepare for distance learning this September.
But printing revenue was down 20% from a year ago and off 5% sequentially, with commercial hardware down 37%, and supplies down 19%, only partially offset by a 7% increase in consumer hardware revenue. Hardware units were down 2% overall, with commercial units down 32% and consumer units up 3%.
Operating expenses were down $273 million from a year ago, and HP CFO Steve Fieler said in an interview that the company is ahead of plan on its previously announced $1.2 billion cost-cutting program.
Meanwhile, he notes that the company bought back 56 million shares for $953 million in the quarter, reducing the company’s share count by about 4%. Fieler says the company expects to continue to buy back about $1 billion of stock per quarter for the foreseeable future. The company has about $14 billion remaining on its current stock repurchase authorization, equal to more than half of the company’s current market value.
For the fourth quarter, the company projected non-GAAP revenue of 50 to 54 cents a share, which, at the midpoint of the range, is ahead of the Street consensus of 52 cents.
HP stock is down 9% this year, versus a 30% gain for the
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