/>
X
Business

HP earnings on tap: Strong quarter but integration questions loom

HP's second quarter results are expected to be strong courtesy of a rebound in technology spending, but there will be a lot of questions about the company's integration plans for 3Com and Palm.
Written by Larry Dignan, Contributor

Hewlett-Packard's second quarter results are expected to be strong courtesy of a rebound in technology spending, but there will be a lot of questions about the company's integration plans for 3Com and Palm, two recent acquisitions.

HP is expected to deliver second quarter revenue of $29.8 billion with earnings of $1.05 a share.

Deutsche Bank analyst Chris Whitmore sets the scene. In a research note, Whitmore said HP will benefit from strong server and PC spending. But software and services may lag expectations.

Whitmore said HP is likely to maintain its fiscal 2010 outlook, but the company may be cautious due to Europe's economic issues. Cisco Systems, however, said Europe wasn't an issue for the company.

Among the key items in order:

What about those integration plans? Whitmore said he will be looking for an update on 3Com and Palm and the integration plans. I've wondered if HP has spread itself too thin. Whitmore noted:

We expect investor interest to focus on HP’s integration plans and strategic direction to reinvigorate developer and consumer interest in the WebOS platform.

Printer units. HP's printing group should deliver solid results amid inventory restocking. However, supply constraints remain a concern. Susquehanna Financial Group analyst Jeffrey Fidacaro said in a research note:

Essentially all of HP’s printer competitors (e.g., Xerox, Canon, and Lexmark) posted strong results. We will be monitoring the amount of Supplies growth attributed to inventory build given that 4% of Lexmark’s 9% supplies growth came from channel fill.

Server sales. HP is expected to deliver strong x86 server revenue, but the competition with Dell and IBM is fierce. There's pent up hardware demand though. Stifel Nicolaus analyst Aaron Rakers said:

We will be particularly interested in the next-phase of this server cycle being driven by the new ProLiant G7 (AMD 6100 Opteron and Nehalem-EX) platforms. Some of our industry checks have suggested that these platforms could take longer to ramp.

Related: HP: Is it spreading itself too thin in the IT wars?

Editorial standards