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November 25, 2009

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Cost cuts aid HP's bottom line

HEWLETT-PACKARD Co's cost cutting and push into new markets is helping to soften the blow from weakness in the company's mainstay businesses.

HP on Monday reported big revenue declines in four of its main divisions -- personal computers, servers, software and printers -- in the latest quarter. A bright spot was technology services, a division HP beefed up last year with the US$13.9 billion acquisition of Electronic Data Systems and which posted better profits. HP is eliminating 24,600 jobs as part of that takeover.

HP's numbers reinforce trends other companies have reported: Consumers and China are showing stronger demand, while businesses remain hesitant. Other tech heavyweights such as Google Inc, IBM, Intel Corp and Microsoft Corp have reported better conditions in some of their businesses.

HP said after the market closed that its earnings jumped 14 percent to US$2.4 billion, or 99 cents per share, in the three months ended October 31. That compares with US$2.1 billion, or 84 cents per share, in the year-ago period.

Excluding one-time items, net income totaled US$1.14 per share. Sales fell 8 percent to US$30.8 billion, or dropped 5 percent if currency fluctuations are stripped out. By both measures, the results exceeded the expectations of analysts polled by Thomson Reuters.

HP also added US$8 billion to its stock buyback program, boosting the total available to US$12 billion. HP's latest moves represent a shift from the company's dependence on the PC market, which is vulnerable to swings in consumer and corporate spending, as well as to fluctuations in prices for components like memory chips and LCD screens.

The PC division supplies a third of HP's revenue but just 15 percent of the company's operating profit, numbers that are getting slimmer as PC makers aggressively cut prices.



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