Hewlett-Packard Co. raised its 2013 earnings outlook after beating low expectations, as CEO Meg Whitman's turnaround plan helped to shore up profits and offset shrinking personal computer sales with enterprise computing services.
While fiscal second-quarter profit plummeted 32 percent, Wall Street had braced for worse. HP shares gained 14 percent after the company projected full-year earnings per share of $3.50 to $3.60, raising the lower end by 10 cents.
Whitman, who took the helm at the world's largest PC maker over a year ago, is orchestrating a turnaround to recapture some of the Silicon Valley icon's former strong growth, a process she has said could take years.
HP received a better investor welcome for its results than smaller rival Dell Inc, which last week reported a 79 percent slide in profit.
Net income fell to $1.08 billion, or 55 cents a share, from $1.59 billion, or 80 cents a share, a year earlier.
The company earned 87 cents per share on an operating basis during the second quarter on revenue of $27.6 billion.
HP had expected earnings of 81 cents a share on revenue of just over $28 billion, according to the average estimate of analysts polled by Thomson Reuters I/B/E/S.
"This is another good deposit on the road to our turnaround here," HP Chief Financial Officer Cathie Lesjak said in an interview. "We are roughly where we want to be in total on the company."
Enterprise services and printing units are "probably a little bit ahead," she said, adding that the two businesses helped drive the company's gross margin improvement during the quarter.
STEEP DECLINE IN PC SALES
For its fiscal third quarter, it estimated non-GAAP earnings per share of 84 to 87 cents, higher than 83 cents expected by Wall Street analysts.
Revenue fell across HP's main business divisions, with the steepest decline in the personal systems group. Sales from HP's largest, PC-focused unit dived 20 percent to $7.58 billion.
But that same division recorded a 3.2 percent operating margin, up from about 2.7 percent in the previous quarter, as the company focuses on improving profitability.
The printing division had the smallest revenue decline, of 1 percent, year over year, but the company said it had a "strong operating margin" of 15.8 percent.
HP generated $3.6 billion in cash flow during the quarter and used some of the funds to reduce net debt by $1.8 billion to $2.9 billion. The company had $13.6 billion in gross cash at the end of the quarter.
HP shares rose $2.91 to $24.14 in extended trading after closing slightly higher at $21.23 on the New York Stock Exchange.
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