HP's PC business and software sales from its Mercury Interactive acquisition helped produce net profit of $1.8 billion, for a 29 per cent increase, with a 16 per cent boost in revenue in the fiscal third quarter, according to financial results released on Thursday.

HP's profit was $0.66 per share, on revenue of $25.4 billion in the three months that ended July 31, up from $0.48 a share, on revenue of $21.9 billion in the same quarter last year. Profit in that quarter was $1.4 billion.

Revenue from its Personal Systems Group, primarily desktop and notebook computers sold to consumers, grew 29 percent to $8.9 billion. Revenue from the HP Software group boosted revenue 74 percent to $554 million, driven by sales from its $4.5 billion acquisition of Mercury Interactive in 2006. Mercury was not yet part of HP in last year's third quarter.

HP is growing its software portfolio further with the acquisition, announced July 23, of Opsware for $1.6 billion. Expected to be completed in the current quarter, the deal will be HP's third largest acquisition behind Mercury and the $19 billion acquisition of Compaq in 2002.

HP CEO, Chairman and President Mark Hurd credited cost discipline and lower component prices for some of the margin improvement, while Chief Financial Officer Kathy Lesjak said expenses grew at only one-third the rate of revenue growth.

Revenue from HP's Enterprise Server and Storage group grew 10 per cent from a year earlier to $4.5 billion, while operating profit for that group rose to 10.2 per cent of revenue, from 7.2 per cent a year earlier. Hurd noted an 81 per cent increase in revenue from HP's x86 blade servers. Storage revenue grew 6 percent, as a 7 per cent increase in disk storage technology was offset by a decline in tape storage revenue.

Lesjak said the company is raising its outlook for the current quarter, forecasting revenue between $27 billion and $27.2 billion. However, that revenue growth is up between 6 per cent and 7 per cent from the prior quarter, which is below HP's historical quarter-to-quarter growth of between 10 per cent and 12 per cent, Lesjak said.

The company's PC business has driven those galloping gains and may not be able to maintain the pace, she said.

"We do not believe it's prudent to set investor expectations that our [PC] business can continue to grow at three times the market rate," Lesjak said. Besides the 29 per cent increase in personal computer revenue, HP saw notebook computer revenue rise by 54 per cent and operating margins for the group reach 5.8 per cent of revenue, versus 4 per cent a year earlier.

Also tempering the forecast, she said HP has seen increases in component prices, particularly the cost of memory.

HP forecasts earnings of $0.80 to $0.81 cents per share, up 18 per cent or 19 per cent from the year-earlier quarter.

The third quarter results matched HP's second quarter performance of net income of US$1.8 billion, or $0.65 a share, on revenue of $25.5 billion. The results also matched the consensus of analysts surveyed by Thomson Financial, who forecast $0.66 a share profit on revenue of $24.09 billion.