Hewlett-Packard touts merger gains

Carly Fiorina: "Our strategy is working"

Tech giant Hewlett-Packard has claimed it is ahead of target in reaping benefits from the controversial merger with PC maker Compaq.

Announcing underlying profits of $721m for the August to October period, the firm said its merger-related cost savings were running 30% ahead of target.

The firm has axed 12,500 jobs, 25% more than had been planned for the first six months of the merger.

"We're cutting cost, boosting productivity, delivering more for our customers and shareowners and investing in the future," said chairman and chief executive Carly Fiorina.

"Our strategy is working and we're picking up momentum."

The statement comes a week after former Compaq boss Michael Capellas, one of the driving forces behind the merger with H-P, resigned as president of the combined firm to head bankrupt telecoms giant WorldCom.

Turnaround

H-P's profit, equivalent to 24 cents a share was in line with Wall Street forecasts, and represented a marked improvement on its performance in the May to July quarter.

By some accounting techniques, H-P lost the equivalent of 67 cents a share in that quarter, a loss blamed on merger costs.

But revenues were little changed over the quarter compared with the combined Compaq and H-P takings a year ago.

Mixed bag

The imaging and printing division, which includes the iconic H-P printers, publishing systems and printing supplies, reported record revenues of $5.6bn for the August to October period, up 12% year on year.

"Highlights included a strong response to the company's 'big bang' consumer launch of 50 new imaging and printing products," the firm said.

The key personal systems arm, which includes PC-making operations, remained in the red, albeit seeing losses halve, compared with the quarter before.

Revenue, however, fell 6% over the year.

The firm's services division reported operating profits up £9% on the quarter before, but down 10% year-on-year.

Pension cost

The firm forecast that revenues would edge ahead to $18.4bn in the current November to January quarter, backed by rising advertising spend.

Underlying earnings would come in at the equivalent of 27 cents per share.

The firm also admitted it would also be forced to swallow a one-off cost involved in aligning Compaq pension programmes with those at H-P.