A Bellwether Rings True

The rest of the world wants laptops, too. Thats one of the takeaways from H-Ps earnings.

Look at H-P to get a sense of what businesses are spending on. Then subtract some.

The computer maker Tuesday reported that third-quarter revenue was up 10% from the year-ago period to $28 billion. Net income was $2 billion, up 14% from a year ago. Both results topped analysts forecasts. Revenue in the Americas only grew 4%, but that was offset by strong sales overseas, where H-P collected 68% of its revenues.

One product that had a big quarter: laptop computers. Sales of the machines grew 26% year-over-year, while sales of the desktop variety only grew 6%. Printer sales were down, servers and storage devices sold to businesses were up somewhat; sales of software and consulting services were up big.

H-Ps earning also reassert the companys role as a bellwether for the technology industry, albeit a bellwether that consistently outperforms the competition. On Monday, tech researchers Gartner released an updated forecast for worldwide tech spending. It was as if they got a sneak peak at H-Ps balance sheet. Software sales are up across the industry, albeit 10% globally compared with 29% for H-P. But in both cases, they only represent a small fraction of total sales.

Hardware sales make up a much bigger percentage of the overall tech spend, and a much bigger percentage of H-Ps revenue. In both cases growth is slower, 7% globally, compared with 5% for H-P. (This isnt quite apples-to-apples, because H-P counts PC sales separately and doesnt distinguish between sales to businesses and sales to consumers.) Many of the corporate tech leaders weve spoken to say that theyre delaying hardware purchases until the economy get better.

Lastly, businesses are buying more and more tech services. It showed up globally, where Gartner forecasts services growth of 10%. H-P reported an increase of 14% in sales of these services from the year-ago quarter. Expect this number to increase sharply for the current quarter when H-P will finalize the acquisition of consulting company EDS.

-Ben Worthen