UPDATE 3-HP reins in revenue slide as turnaround progresses

SAN FRANCISCO, Feb 20 (Reuters) - Hewlett Packard Co's revenue fell less than Wall Street expected in the first quarter and it raised its outlook for fiscal 2014 earnings, as the computing giant grew sales at its two largest businesses and again signaled a better year ahead.

HP, which is in the midst of a multi-year turnaround effort intended to revive growth, is trying to wean the Silicon Valley company off its reliance on personal computers and re-orient on sales of computing equipment and networking gear to enterprises.

On Thursday, the company broke its streak on the PC-focused personal system group with a 4 percent gain in revenue.

Business at its enterprise group, the lynchpin of its strategy to transform itself into an IBM-like provider of enterprise computing services, edged 1 percent higher as server sales fared better than analysts had expected.

Chief Executive Officer Meg Whitman, who took the helm of the world's largest PC maker more than a year ago, has said she expects revenue to stabilize in 2014, with some areas of growth for the company.

On Thursday, Whitman stuck to that outlook and told Reuters she was upbeat on their European business as the developed part of that region stabilized, and saw strength in emerging markets like India and Mexico. She added that HP's business in China stayed largely flat, better than competitors had fared.

"Pleased with the progress, more work to be done," Whitman summarized for Reuters in an interview.

On Thursday, HP raised the lower end of its full-year earnings outlook slightly, to $3.60 to $3.75 versus a previous forecast for $3.55 to $3.75.

"They're in a strong position to do well this year, but it also shows the continued challenges in their enterprise business, their software business," said Shannon Cross of Cross Research. "They're clearly not done in terms of improving."


Investors have been cautious on the outlook for computing companies after IBM posted disappointing results, in part because of slowing corporate and emerging markets demand, and a backlash against U.S. corporations in China over revelations of U.S. spying activity abroad.

Cisco Systems Inc, a rival in networking equipment, forecast a 6 percent to 8 percent decline in revenue this quarter.

For the first quarter, HP posted revenue of $28.2 billion, down slightly from $28.4 billion a year earlier and beating expectations for about $27.2 billion.

The company posted a 16 percent rise net earnings of $1.4 billion in the first quarter, compared to $1.2 billion a year ago. Excluding items, it earned 90 cents a share, better than the 84 cents analysts had expected, according to Thomson Reuters I/B/E/S.

Shares of HP gained a penny to $30.20 after hours, from a close of $30.19 on the New York Stock Exchange.

"HP is in a stronger position today than we've been in quite some time, Whitman said in a statement.

"Rest assured, we're not taking our foot off the pedal," she told analysts later on a conference call. "We have a lot of work ahead of us."