Hewlett-Packard Co.'s fourth-quarter profit easily exceeded Wall Street's expectations, bolstered by surging laptop sales and continued strong demand for highly profitable printer ink.
The board of the Palo Alto-based computer and printer maker also authorized an additional $8 billion for stock buybacks, a sign the company believes its shares are undervalued.
Strong PC sales have fueled much of HP's growth, but the company doesn't expect that business to keep growing as fast as it has. Printer ink continues to be the company's cash cow.
A brighter financial forecast helped lift shares 45 cents in after-hours trading Monday to $49.89. During the regular session, before the results were reported, the stock fell $1.31 to $49.44.
HP's net income leaped 28 percent in the three months ended Oct. 31, rising from $1.69 billion, or 60 cents per share, to $2.16 billion, or 81 cents per share.
Excluding one-time charges, HP's profit was 86 cents per share, four cents higher than the average estimate of analysts polled by Thomson Financial.
Sales jumped 15 percent over last year to $28.29 billion, nearly $1 billion more than the $27.4 billion Wall Street was expecting.
Laptop sales jumped 49 percent over last year to $5.16 billion, the company's highest-selling single category. Desktop computer sales rose 15 percent to $4.21 billion.
Taken together, the two categories made up roughly a third of HP's overall sales during the quarter.
HP is the world's No. 1 PC seller. Since stealing the title away from Dell Inc. more than a year ago, HP has expanded its lead to nearly 5 percentage points, commanding 20 percent of the market, compared with Dell's roughly 15 percent, according to the latest data from market researcher IDC.
At the same time last year, HP held only a slight lead. Cheaper PC component prices, particularly for memory chips, have helped both companies.
Despite the gains in PC sales, HP's most profitable business is still printer ink.
The company derived 42 percent of its $2.63 billion in total operating profits in the latest quarter from its Imaging and Printing Group, nearly double the amount contributed by the Personal Systems Group, which includes PCs.
As the world's largest technology company, HP's results are closely watched for signs about the health of technology spending.
Investors were particularly interested this quarter in whether HP was hurt by the mortgage distress in the U.S. that has saddled banks with billions of dollars in losses.
Chief Executive Mark Hurd dismissed those concerns, saying HP derives only a small slice of its business from the financial services sector. He didn't see any "material weakness" in that segment during the latest quarter, he said Monday.
"We're actually trying to get more exposed to financial services_ we see that as a big opportunity for us," Hurd said on a conference call with analysts.
For the full fiscal year 2007, HP rang up $104.3 billion in sales, a 14 percent improvement over last year and the first time HP has cracked $100 billion in annual sales. Net income for the year was $7.26 billion, or $2.68 per share.
Investors were pleased with a higher financial forecast.
HP expects profits - excluding one-time charges - of 80 cents per share in the first quarter, three cents higher than Wall Street's forecasts. And it predicts sales between $27.4 billion and $27.5 billion, also higher than the $27 billion analysts were expecting.
HP cautioned investors against expecting the PC business to keep up its rapid gains. The company's current forecasts incorporate a more conservative estimate for PC growth than the actual rate that business has grown in recent quarters.
Still, HP said it expected to continue taking market share from other makers.
"The numbers we've delivered are huge - it's not prudent to build a business model on that," Hurd said in an interview. "We're not building our models on the kind of growth we've seen in the past." ( AP )