HP’s 4th-Quarter Profit Up 24%; Costs Also Rise

Hewlett-Packard Co. said Monday that fiscal fourth-quarter profit rose 24%, missing Wall Street estimates for the third quarter in a row, as operating costs rose more than analysts expected.

The world’s second-largest computer maker said earnings in the quarter ended Oct. 31 rose to $806 million, or 75 cents a share, from $648 million, or 62 cents, in the year-earlier period. Analysts were expecting Hewlett-Packard to earn 78 cents a share.

The results mark the sixth time in seven quarters that Hewlett-Packard’s profit has fallen short of analysts’ expectations, even as sales exceeded estimates. The company’s 16% increase in revenue was matched by rising operating costs as it hired 1,400 new employees and paid for several acquisitions during the quarter.

“They did well on revenue, but what they gained there, they gave up in profit margins,” said Bill Milton, an analyst at Brown Bros. Harriman & Co. in New York.

Revenue rose to $11.8 billion from $10.2 billion in the year-ago quarter, Hewlett-Packard said, driven in part by new personal computers that cost about $1,000.

Its sales would have risen about 20% in the quarter if the U.S. dollar hadn’t strengthened against most other currencies, the firm said. A stronger dollar makes revenue earned abroad worth less in U.S. currency.

The Palo Alto-based company has been struggling to cut costs in order to fend off rivals in the competitive PC market.

Hewlett-Packard’s cost of manufacturing products rose about 15% from year-ago levels, less than the increase in revenue.

Other expenses rose 16%, however, more than most analysts expected. Total costs rose 15% to $10.66 billion, from $9.27 billion.

“Hiring was too aggressive this quarter,” said Robert Wayman, Hewlett-Packard’s chief financial officer, in a conference call with analysts and investors. “On expenses, there is clearly more work to do.”

HP shares rose 63 cents to close at $62.25 on the New York Stock Exchange. The earnings were disclosed after the close of trading.

HP said orders during the fourth quarter rose 14% to $11.4 billion, from $10 billion in the year-ago period. Orders from customers outside the U.S. rose 18% to $6.25 billion, from $5.31 billion.