Shares of Hewlett-Packard jumped nearly 3 percent Tuesday, after the computer and printer giant surprised Wall Street with an early morning statement that its upcoming fiscal second-quarter earnings would be better than expected, citing strength in PCs and servers.
The surprise was disclosed after the Palo Alto company discovered an internal e-mail was sent Monday night to someone outside the company. The e-mail contained enough data about HP’s upcoming financial report to make executives nervous about full-disclosure laws. HP then decided to pre-release the good second-quarter results.
“Right now, they aren’t taking any risks,” said Rob Enderle, principal analyst with the Enderle Group in San Jose. “As long as the external (person) doesn’t trade on the news, they are OK. But HP doesn’t want to take any risks. … Remember, this is the company where information was being leaked out of the board and it got them into a lot of trouble.”
Last year, HP was embroiled in the fallout from an internal investigation to find who on its board was leaking information to the press. Investigators hired by the company used a tactic called “pretexting” to get personal phone records of board members and journalists. The imbroglio led to the departure of three HP board members, including chair Patricia Dunn and HP’s general counsel. Congressional hearings were held and criminal charges were filed and then dropped against Dunn. Criminal charges against two outside investigators and former HP attorney Kevin Hunsaker were reduced to one misdemeanor each.
HP said Tuesday that it would not disclose the contents of the e-mail, the name of the employee who sent it or to whom it was sent. “It was just old-fashioned human error,” said Emma Wischhusen, an HP spokeswoman.
Analysts and investors were particularly pleased with the earnings news, especially after recent financial results from other major tech companies have been viewed as lackluster.
“It was definitely a pleasant surprise,” said Shaw Wu, an analyst with American Technology Research. “The reason it was a surprise is, if you look at the environment, even with Cisco earnings Tuesday, the U.S. enterprise market continues to be lackluster. We have seen comments from Sun, Cisco, EMC and others that the U.S. enterprise market is less robust and not growing as fast as originally hoped.” The enterprise market refers to the market for corporate computers.
HP said it now expects second-quarter revenue in the range of $25.5 billion to $25.55 billion, up from its previous guidance of $24.5 billion, citing strong sales of its personal computers and commodity servers designed around Intel and Advanced Micro Devices chips.
HP said it expects earnings per share in the range of 64 to 65 cents, up from its previous forecast of 57 to 58 cents a share.
Earnings per share include after-tax costs of about 5 cents a share for amortization charges for the purchase of intangible assets. The company also said its earnings per share benefited from its higher levels of share repurchases during the quarter.
In the second quarter a year earlier, HP reported revenue of $22.6 billion and earnings per share of 66 cents, including a gain from a favorable tax settlement of 15 cents a share.
HP still plans to release its second-quarter earnings, for the quarter ended April 30, on May 16. The company also said it is looking for fiscal third-quarter revenue of approximately $23.7 billion to $23.9 billion, and earnings per share of 59 to 61 cents, including charges and gains. The fiscal third quarter is usually HP’s slowest, analysts said.
Bill Shope, an analyst with JP Morgan, said in a note to clients Tuesday morning that HP’s third-quarter forecast was within his expectations.
“The July quarter guidance is particularly encouraging, in our view, given the typical seasonal pressures the company faces in its enterprise business,” Shope said.
The news probably spoiled Chief Executive Mark Hurd’s surprise to Wall Street. Typically, Hurd is known among the financial community for under-promising and over-delivering.
“It’s a testament to their execution and to their ability to gain share,” Wu said. He said HP’s gains in the personal computer business have also been hurting rival Dell.
HP shares closed at $45.01, up $1.21, or 2.8 percent, in heavy trading on the New York Stock Exchange.
Contact Therese Poletti at tpoletti@mercurynews.com or (415) 477-2510.
