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Arguably HP should be a company in crisis. It has been dogged by an embarrassing scandal in which private detectives, acting on behalf of the company, tailed and illegally obtained the phone records of board members and their supposed journalist contacts. A Congressional committee hearing, the filing of criminal charges against HP executives (including the now ex-chairman) and an investigation by the US’s Securities and Exchange Committee has followed. As the scandal broke around it, HP’s former CEO, Carly Fiorina, poured petrol on the flames by publishing her memoirs, painting an unflattering picture of a company often locked in internecine strife (see Books).

But CEO Mark Hurd’s stoic leadership seems to have proved a sufficient counterbalance to that, leaving the systems, software and services giant relatively unscathed. And nothing says that more clearly than the numbers.

Reporting its performance for the fourth quarter ended 31 October, the company announced a quadrupling of earnings from $416 million to $1.7 billion and solid revenues growth of 7% over the year-ago quarter to $24.6 billion.

Its renewed focus on becoming a major software presence in the industry, most notably with the August 2006 acquisition of software management vendor Mercury Interactive for $4.5 billion, resulted in the largest revenue increase, as software sales rose 14% to $349 million quarter-on-quarter.

But it was strong sales of laptop computers and printers through its 140,000 strong retailer network that catapulted HP past rival Dell to recapture the number one PC position for the first time since 2003. In particular, a 24% year-on-year increase in notebook revenue helped grow its profitable personal systems group by 10% to $7.8 billion.

Hurd is reaping the benefits of a July 2005 restructuring plan that set a goal of saving the company $1.9 billion a year by reducing the size of HP’s workforce by 15,000. During the fourth quarter, HP cut a further 4,200 positions, bringing the total so far to 14,200.

“Without a doubt, HP is a more confident company since Mark Hurd joined,” says Eamonn Kennedy, principal analyst at IT market watcher Ovum. “This enhanced confidence has been fuelled by competitive successes, a surging share price, more direct responsibility for executives, broadly based corporate growth and the availability of cash derived from improved margins.”

That makes HP the largest IT company in the world. With revenues of $91.7 billion for its full 2006 fiscal year, HP is already ahead of the consensus of analyst revenue estimates for IBM of $90.7 billion for the year to 31 December.

Meanwhile, LENOVO, the world’s third largest computer maker, released a worse-than-expected slide in fiscal second-quarter earnings. As revenue for its quarter ended 30 September 2006 rose a lacklustre 1% to $3.7 billion, net income fell 21% from $48.0 million to $37.9 million.

Despite the company taking ownership of the IBM PC business last year, Lenovo is struggling to emulate the success it has had in its home territory of China in other major economies. While its market share in China continues to surge – PC unit sales were up 25% against the year-ago quarter – shipments in the US decreased by 9% during the quarter and were flat in the rest of the Asia/Pacific region. One bright spot was Europe, where growth was a respectable 5%.

MID-MARKET EXCITEMENT

There was a very different picture among vendors in the mid-market applications sector.

In particular, a 45% increase in customers fuelled strong revenue growth at software-as-a-service provider SALESFORCE.COM of 57%, from $82.7 million to $130.1 million for its quarter ended 31 October 2006.

But although Marc Benioff, Salesforce’s CEO, described it as a “spectacular quarter”, growth was achieved at higher levels of marketing and research expenditure. Total operating expenses rose to $98.8 million, up from its year-ago figure of $56.7 million. Together with a $10.2 million stock-based compensation expense, those sent profits nosediving almost 400% from $13.1 million to $339,000.

One of Salesforce’s packaged software rivals, CDC Corp, moved its bottom line in the opposite direction. The Chinese-owned company, which sells mobile services as well as enterprise software, said a combination of organic sales growth and acquisitions helped raise its profits to $3.1 million from its year-ago loss of $1.2 million, for the quarter ending 30 September 2006.

Strong software sales, a 35% increase in licence revenue and uplift in revenues from China.com, its web portal and wireless content unit, all helped push total revenue up 26%, from $61.9 million to $78.2 million.

But the veritable star of the mid-market sector, the UK-headquartered SAGE Group, was running even faster. Alongside its formidable appetite for acquisitions – it has bought five companies this past year and almost 30 since 1991 – Sage also chalked up solid 7% organic growth in the second half of its fiscal year. Overall, revenue for the six months ending 30 September rose 24% to £479.7 million ($897m).

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