Three Drivers to HP's Earnings

NEW YORK (TheStreet) -- Hewlett-Packard(HPQ) is set to announce its second-quarter results on May 23.

For the period it estimates non-GAAP diluted earnings per share to be in the range of 88 cents to 91 cents and GAAP diluted EPS to be in the range of 68 cents to 71 cents. There was no change to HP's previously provided fiscal 2012 outlook of non-GAAP diluted EPS of at least $4.00 and GAAP diluted EPS of approximately $3.20, despite a flat first quarter.

Fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately 80 cents per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges. First-quarter revenue were $30 billion.

See our full analysis on HP.

Key Business Drivers For 2012

1) Ultra books

HP's Envy Ultrabook and Sleekbook lines will drive its market-leading personal computer division. Currently this division constitutes nearly 15% of the current Trefis price estimate on HP.

With HP regaining its top spot in the PC market, these ultra-thin PCs can be a serious threat to Macbooks. HP has also adapted the design to run AMD chips, which makes this line of Sleekbooks significantly lower in price starting at $599. This is much cheaper than the Ultrabook range that starts at $799 and is much cheaper than the Dell(DELL) Ultrabook, the XPS 13, which is priced at $999.

With a range of cheaper ultra-thin laptops, HP can potentially gain a much larger market share than expected because its competitors have no offering in this range.

2) MPS - Managed Printing Services

HP is trying to offer PaaS (Printing-as-a-Service) to its customers. The advantage of doing this would be better pricing power for HP and it is cheaper to use for its clients. The biggest advantage for HP, however, is the nature of service contracts, which are usually of long term and would ensure consistent revenue. We expect HP to focus more on managed printing services going forward.