HP results spark tech stocks surge

HP results spark tech stocks surge

Tech stocks soared on Nasdaq yesterday after computer giant Hewlett-Packard surprised Wall Street with an upbeat revenue forecast, stirring a tender hope in the industry for a recovery.

Shares of Hewlett-Packard (HP) surged as much as 15 per cent on the New York stock exchange yesterday to hit levels not seen in six months after HP posted fourth quarter revenue results which exceeded Wall Street expectations.

Investors showed signs that the merger integration with Compaq is progressing well, as HP's shares climbed US$2.14, or 13 per cent, to close at $18.99, with nearly 54 million shares changing hands by the end of trading on Thursday. HP's results sparked investor activity in technology stock generally, with other technology-related stocks racking up the gains. The Nasdaq composite index went up more than 3 per cent for two straight days, to its highest close in more than five months.

Storage and computer hardware stock were amongst those sectors which experience the most gains. Chipmakers Intel and Advanced Micro Devices (AMD) rose $1.06 to close at $20.21, and 59 cents to reach $6.14, respectively.

Network gear maker Cisco Systems climbed 86 cents, or 6 per cent, to finish trading at $15.24. Brocade Communications Systems rose 89 cents, or 14 per cent, to reach $7.28. After close of trading, Brocade also released fourth-quarter figures that revealed the company turning a profit after posting a loss a year ago

Data-storage companies Network Appliance rose $1.98, or 16.6 per cent, to close at $13.91, and EMC gained 51 cents, or 8 per cent, to finish at $6.85. IBM also soared another $3.29 to $84.51.

The software sector also experienced a surge in investor activity, pushing up the Goldman Sachs Software Index by 5.6 per cent. Microsoft rose $1.22 to $57.84 and Oracle gained 72 cents to reach $11.46.

Other big software gainers included BEA Systems which climbed 10.3 per cent, PeopleSoft jumped 7 per cent, Check Point Software gained 9.4 per cent, Veritas rose 8.9 per cent and Siebel Systems added 7.9 per cent.

HP reported fourth quarter revenue of $18 billion, a nine per cent increase in revenue from last quarter's $16.5 billion in its results, posted on Wednesday in the US. HP attributes its results to cost cutting activities and lower losses in its PC and high end computer server business. But most of HP's results can be attributed to its flagship printing and imaging business, which spat out US $5.6 billion in revenue for the quarter, marking a 12 per cent increase year on year.

HP also reaped benefits from merger related cost cuts which exceeded its objectives. HP cut costs by $651 million, 30 per cent above its plan of $500 million. Of the $651 million of merger-related costs savings, $257 million came from workforce reductions. HP cut 12,500 of its workforce in the half, 25 per cent above its goal. The company plans to cut 17,900 jobs by the end of fiscal 2003.

Carly Fiorina, HP chairman and chief executive officer said in a statement the quarterly report provides early proof that HP is meeting or exceeding goals six months into the merger with Compaq.

"We delivered solid results in a tough market. The HP team is executing, customers are responding and we're beginning to deliver on the promise of the merger. We feel good about our trajectory," she said.

"We still have a lot more work to do," Ms Fiorina said. "We won't be satisfied till each of our businesses is strongly profitable and increasing its market share, and we fully achieve the $3 billion in cost savings that are crucial for our success. These are aspirations we feel confident we will achieve over time."

All results are in US dollars.

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