Hewlett Packard's legendary run of profit growth drew to a halt in the fourth quarter with a four per cent decline in earnings, although they increased by six per cent for the whole year.
The Q4 results - earnings of $648 million - fell short of Wall Street estimates, mainly because of a charge for withdrawing from disk mechanism manufacturing. "HP has done so well for so long that it's a shock when it ends, but these results really aren't bad," said John Jones of Salomon Brothers.
For the fourth quarter, revenues rose by 12 per cent to $10.15 billion and orders also leapt, up 15 per cent. This was the main consolation for president Lewis Platt, who admitted he was "somewhat disappointed with our earnings". He said this disappointment was "tempered by the fact that this was a tough comparison with very strong earnings growth in last year's fourth quarter". Revenue growth was also short of expectations because orders had slipped in Q3, but the good order record of Q4 gave out good signals for the start of fiscal 1997. Platt was also encouraged by " a substantial reduction" in the rise in operating expenses.
In the UK, which does not report separate earnings, managing director John Golding said orders were up 20 per cent on the same quarter last year and exports from the UK were stable. UK employees will receive a total of #5.7 million in profit sharing. UK turnover topped #1.9 billion for the year.
Worldwide, the strongest products in terms of orders were the Pavilion multimedia home PCs, HP9000 servers, and general services, while orders for workstations and mobile PCs were weak. Laserjet printers saw moderate order growth, but colour models achieved "extraordinary growth".
Cost of sale rose to 67.2 per cent of revenue (but would have been 66 per cent without the charge for quitting the disk mechanism business). This compares to 65.3 per cent a year ago. Operating expenses rose 11 per cent, the slowest rate of increase for several years, mainly due to slowdowns in hiring.
For the year, net income rose six per cent to $2.59 billion and sales were up 22 per cent to $38.42 billion.
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