By William Fellows

The jury is still out on Hewlett-Packard Co’s ability to turn its business around. It recorded a small 3.3% second quarter revenue increase and even beat analysts’ earnings expectations, but in its management’s own words performance was still well below our goals.

Now well into its second turnaround plan in a year, the company might still be hurting because it’s still looking for a leader, although it has begun to provide some vision by putting a focus – and a significant marketing expenditure – behind the e-services arrowhead. Its partnerships with Qwest Communications, Ariba, BEA and First Security demonstrate an improved execution on its ‘internet chapter two’ vision. It has a bigger deal with Qwest plus its Fremont application environment in the pipe. The quarter was characterized by two large-scale product introductions, the N-Class Unix server and its Hitachi Data Systems-based enterprise storage.

Once again HP laid the blame for weak revenue at the door of its Unix server business, which declined year over year. It also warned that Unix business could be adversely affected in the current quarter and that Unix revenue growth would likely be below the overall growth in revenue. While the high-end V-Class turned in a good performance, the new N-Class servers don’t ship until next month, holding up new procurement. It hopes things will improve in the fourth quarter but isn’t sticking its neck out as far as to suggest Unix growth in that period will outstrip overall growth in its business. Windows NT software and support grew strongly, as well as HP OpenView and internet software businesses. The test and measurement business, which is being spun off, declined 4%.

It said commercial and consumer PC revenue improved substantially and claims it has held on to its position as the world’s number four PC manufacturer and increased market share last quarter. Low-end servers were the strongest performers.

In printers it held on to or increased its share of the ink-jet printer market. It grew its laser jet business in all sectors except above the 24 pages per minute watershed where its share went from 94% to 90%. It says growth in the color laser jet space is driving growth in its printer business as a whole. It has shipped 300,000 units of its sub-$100 Apollo ink-jets.

HP reported second quarter net income up 34% at $918m compared with $685m last time on revenue that increased 3.3% to $12.4bn from $12bn. Earnings per share were $0.88 compared with the consensus estimate of $0.80. In the quarter US revenue grew 2% to $5.4bn, European revenue increased 8% to $4.5bn which Asia Pacific revenue declined 3% to $1.9bn while Canada and Latin America revenue was flat at $650m. At the half way mark net income was up 6% at $1.9bn over $1.6bn while revenue was up 2% at $24.35 over $23.85bn. Computer products revenue was up 4.5% at $10.5bn over $10.04bn. Test and measurement declined to $991m from $1.12bn. Semiconductor sales were $268m versus $267m last time.