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The current quarter is historically HP's weakest and the company's guidance was highly conservative. It expects to do at least 41-44 cents on revenues of $21.75 billion. It comes within Wall Street expectations.

HP's owes its renaissance to cost cutting, gains in PCs and higher revenues. As Hurd said, "We grew revenue, expanded margins and generated record cash flow."

HP said Q2 revenue in the Americas grew 10% to $9.7 billion, revenue in EMEA declined 2% to $9 billion, and revenue in Asia Pacific grew 7% to $3.9 billion. Hurd said the company's experience in Russia was strong as was Eastern Europe.

PC revenues, a third of the company, were up 10% year-over-year to $7 billion, with unit shipments up 16%. Desktop revenue increased 1% and notebook revenue - (whoa) - grew 27%. Commercial client revenue grew 3% year-over-year, while consumer client revenue increased 24%. Dell is more exposed to the commercial freeze than HP is. HP's PC operating profit was $248 million, or 3.6% of revenue, up from $147 million, or 2.3% year-over-year.

HP is suddenly finding utility in having 110,000 retail outlets in 100 countries and can thumb its nose at Dell.

Revenue from HP's crucial printing group grew 5% year-over-year to $6.7 billion. On a year-over-year basis, supplies revenue grew 10%, commercial hardware revenue grew 4% and consumer hardware revenue declined 8%. Color laser printer shipments and printer-based MFP shipments were up 38% and 44% year-over-year, respectively. Operating profit was $1 billion, or 15.5% of revenue, up from $814 million, or 12.7% of revenue.

HP experienced weakness in inkjets but exceeded its operating margin on the strength of that spike in supply sales. It intends to try to tickle growth in the second half

Enterprise Storage and Servers (ESS) reported revenues of $4.3 billion, up 2% year-over-year. Industry-standard server revenue increased 4%, with blade revenue growth of 60% (some of it apparently thanks to AMD). Networked storage revenue was up 8%, led by external arrays, where high-end XP revenue grew 8% and revenue in the mid-range EVA line increased 46%. Business critical systems revenue declined 7%, despite 93% growth in Integrity systems Declines in PA-RISC and Alpha took their toll. ESS operating profit was $322 million, or 7.5% of revenue, up from $180 million, or 4.3% of revenue last year.

Hurd indicated he was going to fiddle with ESS pricing this quarter.

HP Services revenue declined 2% year-over-year to $3.9 billion for an operating profit of $345 million, or 8.9% of revenue, up from $292 million, or 7.3% of revenue.

Software revenue came to $330 million, up 20% year-over-year, with revenue in OpenView and OpenCall increasing 25% and 11%, respectively. HP said OpenView growth was led by solid momentum associated with the recently completed acquisition of Peregrine Systems, which added key asset and service management components to the OpenView portfolio. Software operating profit was $3 million, or 0.9% of revenue, compared with a loss of $2 million last year.

HP Financial Services reported revenue of $518 million, down 5% year-over-year. Finance volume decreased 14% while net portfolio assets grew 1%. Its operating profit was $39 million, or 7.5% of revenue, down from $58 million, or 10.7% of revenue.

Hurd said services needed to automate more and get its costs right.

HP had $14.1 billion in the bank on April 30, the end of the quarter.

Oh, yes, HP has formed an advanced technology center in Bangalore and it's going to collapse its 85 data centers worldwide into six in the US over the next three or four years to save itself a billion bucks a year in IT spending and utility costs.

There'll be two facilities in Atlanta, two in Houston and two in Austin. The sites were reportedly picked because the towns aren't prone to natural disasters, they're affordable and they've got the bandwidth. The company indicated the sites would be highly automated, fitted with "smart cooling" and capable of remote management. HP figures the US has the best utility and data communications infrastructure.

(This story appeared originally in Client Server News.)

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