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Technology giant HEWLETT-PACKARD underscored its resurgence in August with a stronger-than-expected quarterly performance that confirmed it has now overtaken IBM as the world’s largest IT company.

Upbeat sales of PCs and software, alongside its traditional money-spinner, printers, pushed HP’s revenues up 5% to $21.9 billion for the company’s third fiscal quarter ending 31 July 2006.

The results are even more impressive given that HP was struggling on many fronts just two years ago. Since former NCR chief Mark Hurd took over as CEO in April 2005, HP’s share price has risen by 75%, and trailing 12 month revenues now total $90 billion, compared to $88.5 billion at IBM.

Hurd’s Midas touch was evident across most of the company’s segments: printing revenue grew 5% to $6.2 billion; storage and server sales were up 3% to $4.1 billion; software revenue increased 30% to $318 million; and financial services grew 6% to $519 million. Revenue for the software division is likely to surge further once HP’s $4.5 billion acquisition of Mercury Interactive, announced in August 2006, kicks in. That deal creates a software unit with annual revenues of $2 billion.

Surprisingly, one of the most significant areas of growth came in its PC division, where revenue jumped 8% over the year-ago quarter to $6.9 billion. In particular, revenue from desktop PCs and laptops rose 5% and 14% respectively. Other systems sales were also strong, with revenue from industry-standard servers jumping 6% as blade server sales accelerated by 37%.

Such numbers were achieved despite the shedding of 1,900 jobs during the quarter. That cost-cutting drive, which the board predicts will save $1.9 billion annually, helped push profits to $1.38 billion for the quarter.

Hurd is bullish about sustaining HP’s lead over IBM. Based on the gains to date, he is confident about hitting an annual revenue target of $92.1 billion; the average of analysts’ estimates for IBM’s fiscal 2006 is $89.9 billion.

But HP’s turnaround performance has focused much attention on the reversing fortunes of the former PC poster child. For years, in the eyes of Wall Street at least, DELL could do no wrong: its turbo-charged growth rate made its competitors look sluggish; its profits were stratospheric while rivals struggled to break even; and its famed direct sales model became a perfect fit for the world of online commerce.

But 2006 has not been Dell’s year. Profits at the world’s biggest PC maker have been falling fast as sales growth has slowed and the rigidity of its channel model has allowed rivals – Hewlett-Packard in particular – to make significant gains.

In the company’s latest quarter, ending 4 August 2006, net income was down 51% on the year-ago period, to $502 million, as growth fell to 5%. And that was even before the company’s August recall of 4 million potentially pyrophoric laptop batteries or the admission that its accounting practices are being scrutinised by regulators.

Kevin Rollins, Dell’s CEO, maintains the company is taking the “necessary actions to correct missteps and improve results for the long term”, including extending its nine-month old relationship with processor manufacturer AMD. The end of its decades-long Intel-only policy saw Dell installing AMD chips in its high-end servers; now that will be extended to Dimension desktop PCs.

THE EUROPEAN CONTINGENT

Meanwhile, troubles continued to mount for beleaguered healthcare software vendor ISOFT. The Manchester-based company, currently restating three years of financial results, reported catastrophic losses totalling £394.6 million ($718.1m) for the second half of its fiscal year, ending 30 April 2006. The losses, on revenues up 3% to £95.5 million ($173.8m), stem from a £350 million writedown of goodwill from its balance sheet in light of accounting irregularities and a restatement of its revenues for the past three years.

Its troubles have also been exacerbated by customers delaying contracts following partner statements by IT services giant Accenture that iSoft failed to deliver on a key part of the huge £6.2 billion National Programme for NHS IT project that Accenture is partly overseeing. The delay resulted in a £45 million drop in its operating profit, and has subsequently led to iSoft announcing plans to cut 15% of its UK staff in an attempt to lower operating costs.

Meanwhile, the UK government has admitted making two upfront payments of £58 million and £23.8 million to iSoft in 2005 and 2006 respectively, helping iSoft meet City expectations.

Elsewhere, within the broader enterprise applications software sector, UNIT 4 AGRESSO reported healthy results, in spite of lower-than-expected licence sales in business software. Revenue for the Netherlands-based company’s first fiscal half, ending 30 June 2006, hit e187.6 million ($225.1m) million, up 16%, elevating profits by 30% to e9.4 million ($11.3m).

The fastest regional growth for Agresso was in the UK, where revenues surged 52% after the company chalked up a series of wins in higher education (including the Loughborough University, the University of Wales in Bangor, the Royal Academy of Music and Leeds Metropolitan University). These followed its earlier acquisition of education sector software company MCA.

The company is now predicting slower growth in the second half, largely because comparisons will be against a boom second period in 2005 when it booked its largest deal ever, an £11 million contract with the UK’s Department of International Development.

Click here to download a full table of key IT suppliers' August's financial results