14 February 2002 Strong sales in personal computers, printing products and outsourcing services helped Hewlett-Packard (HP) achieve higher than expected profits in its fiscal first quarter to the end of January.

Net income more than tripled to $484 million (€557.4m), compared with $141 million (€162.4m) achieved this time last year, excluding charges related to several acquisitions including the controversial Compaq deal.

However, the rising profits were the result of cost-cutting, rather than a surge in sales, sales dropped 8.2% to $11.38 billion (€13.1bn), from $12.4 billion (€14.28bn) achieved in 2001. Furthermore, HP executives warned that revenues would drop even lower in the current quarter.

The quarterly decline in sales was largely due to a weakening in the company’s core enterprise server business, where sales fell 21% compared to the same period a year earlier. The enterprise sector, from which the company derives about two-thirds of its revenues, remained tough as a result of the clamp down on corporate IT spending and aggressive competition, according to HP CEO Carly Fiorina.

But other parts of the business performed better than expected. The company’s printer and imaging unit saw revenues rise 2% sequentially, while revenues at the embedded systems unit, which sells hand-held computers, increased 22% sequentially. HP attributed these increases in sales to an upturn in consumer spending during the period.

Predictably, Fiorina used evidence of a softening in demand in its PC and server divisions to highlight the importance of its Compaq acquisition. “HP needs to do more. We must take decisive actions to improve profitability in computing systems and PCs. Incremental steps will not be enough to attain industry leadership and create shareowner value,” she said.