H-P confident of hitting quarter profit target

By Eric Auchard


SAN FRANCISCO (Reuters) - Hewlett-Packard Co is "very confident" it can hit its current quarter profit target, despite currency headwinds and ongoing weakness in its printer business, a top executive said on Tuesday.


Chief Financial Officer Cathie Lesjak told the Bank of America investment conference in San Francisco she was confident that H-P's personal computer business could meet its operating margin targets of 5.0 to 5.5 percent in fiscal 2009.


Lesjak's comments retained the generally positive tone that she and other top H-P executives had in a meeting with Wall Street analysts on Monday afternoon.


Earlier on Tuesday, H-P rival Dell Inc warned that it had seen further softening in global technology demand and its stock tumbled 10 percent. Ingram Micro Inc, the world's largest computer products distributor, warned of soft demand in Europe and North America and cut its outlook.


H-P shares were up 7.3 percent, a big driver of the Dow Jones Industrials index.


Lesjak said H-P is still "very confident" of the company's earnings outlook for the fourth quarter ending in November. On Monday the company reiterated its previous forecast for a net profit of 95 to 97 cents per share on revenue around $30.2 billion to $30.3 billion for the current quarter.


She said that while the strong dollar could dampen its revenue expectations, it would have no effect on profits. "We really view the impact (from swings in the value of the U.S. dollar) on profit to be marginal at best," the executive said.


Speaking of the prospects for cutting costs, fueling growth and further diversifying the company through its recent acquisition of EDS, Lesjak said: "We are feeling very confident about this transaction."


The H-P financial executive said the company's personal computer business -- its Personal Systems Group (PSG) -- is no longer benefiting from favorable component pricing that helped boost profits earlier in the year.


But Lesjak said that H-P expects to preserve operating margins through existing cost-cutting plans as component prices have turned neutral in terms of margins.


Lesjak said the company will continue to repurchase shares of its own stock, but at reduced levels from the $11 billion it bought back last year because the company can generate profit growth through other levers. Share buybacks have the effect of boosting reported earnings per share.


"I don't think it is going to be necessary to get good EPS (earnings per share) expansion," Lesjak said. "We're not going to have to do a significant share program, at least in (the next) 12 to 15 months," she said, adding: "We will be active in our shares but not at the same pace."


(Editing by Leslie Gevirtz and Gerald E. McCormick)


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John McCormick oversees a group of SourceMedia publications covering technology/cloud, financial planning/investing, health, insurance, accounting and benefits

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