8-21-13 6:35 AM EDT | Email Article

By Benjamin Pimentel, MarketWatch


SAN FRANCISCO (MarketWatch) -- Signs of an uptick in corporate technology spending could give a lift to Hewlett-Packard Co. when the company reports earnings on Wednesday afternoon, though a collapsing PC market is tempering expectations for much upside.


H-P (HPQ) is set to report fiscal third-quarter results after Wednesday's closing bell. Analysts polled by FactSet on average are expecting the company to report a profit of 86 cents a share on revenue of $27.3 billion.


Those are less impressive numbers than from the year-earlier period, when the Palo Alto, Calif.-company posted an adjusted profit of $1 per share on revenue of $29.7 billion.


H-P has been in transition mode as it strives to adapt to a changing market that has been hurt by weakening demand for PCs, a market it has long dominated, and the rise of mobile and cloud computing, where it faces stiff competition.


The company, under Chief Executive Meg Whitman, has been focusing more heavily on higher-margin segments of the corporate IT market. H-P has also cut costs in what Whitman has stated is a multi-year turnaround effort.


"Restructuring savings, return on investments, U.S. IT spend recovery and improved execution should deliver earning per share upside," Morgan Stanley analyst Katy Huberty wrote in a note ahead of the earnings report.


Mizuho Securities analyst Abhey Lamba said H-P revenues "will likely be lighter due to weak PC sales and headwinds in the printing business but earnings per share should be in-line to slightly better."


H-P's report should also help paint a clearer picture of the IT market in the wake of Cisco Systems's (CSCO) more downbeat projections from that company's earnings report last week. RBC Capital's Amit Daryanani said H-P's storage and networking businesses "could surprise to the upside," but its server division "may disappoint driven by aggressive pricing dynamics."


Wall Street has generally been upbeat by H-P's turnaround prospects, as shown by the stock's sharp rise of more than 80% so far this year.


But Raymond James analyst Brian Alexander also argued in a note, "With overall IT spending improving, we believe it is important for H-P to grow sales to move shares higher."

-Benjamin Pimentel; 415-439-6400; AskNewswires@dowjones.com


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08-21-13 0635ET

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