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HP's 'Good News' Mistake

Whoops! They did it again!

You probably never thought of linking Britney Spears to the Silicon Valley stalwart HP, but another embarrassing gaffe grips the folks in Palo Alto.

Somehow, some way, HP's finance team mistakenly releases the company's second quarter guidance which was supposed to be disclosed a week from tomorrow when HP was set to release earnings after the bell. Instead, the company cops to the "inadvertent disclosure of financial information relating to HP's recently completed second fiscal quarter through an internal email sent Monday evening to a single outside party."

Someone hit "send" when they should've hit "save?" Whoops!

The big mystery: who hit "send," and who got the email? It's weird. A company's earnings are the "family jewels" and for something like this to happen is bizarre. I'd get it if the earnings release went out to everyone, all at once, as they do when the financials are released officially. But to have someone send the numbers to a single individual, a week in advance is odd.

Very odd, and after last year's boardroom meltdown and spy scandal that made "pre-texting" a household word, the company can ill-afford what it calls a "simple mistake."

The good news, though, is, well... the good news. HP now offers a new projected range of 69-70 cents in GAAP EPS, or 64-65 cents non-GAAP. The non-GAAP diluted EPS estimates exclude after-tax costs of about a nickel a share connected to the "amortization of purchased, intangible assets."

HP also lifted its top line guidance by $1 billion with a new range of $25.5 billion to $25.55 billion.

The news helped propel HP shares by almost 3% in pre-market trading on Tuesday. That's the biggest jump these shares have seen in about 9 months. And HP stock now sits at a 6-year high. Today's news also extends CEO Mark Hurd's win streak of raising guidance in every quarter since he took over the company. Not bad.

All of this makes the pre-announcement gaffe a lot easier to stomach for HP investors who have enjoyed quite the ride these last two years.

"At the end of the day, they are pre-announcing their results and I don't necessarily think it's all that embarrassing," says Brent Bracelin, at Pacific Crest Securities. "It's not like they are announcing bad news. The fact they are actually sharing good news, that revenue was $1 billion above expectations, earnings were 5-cents above expectations, I wouldn't call that embarrassing."

HP continues to execute on Hurd's master plan of cutting costs, and accelerating growth by remaining aggressive against its faltering rival Dell. IDC last month reported that HP is seeing stronger-than-expected strength in China, Europe and India, and likely increased market share by almost three full points, to something close to 19% against Dell.

HP's pre-announcement suggests that the company will grow its PC business by better than 20% compared to the second quarter of last year. The company reported sequential growth of 17%. That compares to Dell, which is actually seeing year-over-year and sequential declines in its PC business.

There's another part of this story that's worth examining as well. HP's strength follows a much better-than-expected earnings report from Microsoft two weeks ago, enjoying robust sales of its Vista operating system. HP puts the exclamation point on that story, and that actually bodes well for Dell, Intel and even AMD. There was so much concern that Vista wasn't selling as well as analysts had projected. Now there are some key metrics that would suggest otherwise.

"A lot of positives are priced in. The fact that the company was able to generate $1 billion in revenue and 5 cents of earnings upside suggests there is still room for the company to outperform the fundamentals," says Bracelin. "The problem is that it does reflect a lot of the optimism already. At this point, we do think there are better opportunities outside of HP but credit the company and management team for continuing to outperform the relatively low expectations that they have set out there."

Seems the Street may also want to lower expectations about how tight a financial ship this company is running as well when a gaffe like this one occurs.

Questions? Comments? TechCheck@cnbc.com

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