Tax Settlement Lifts HP’s Profit

Hewlett-Packard Co. raised its second-quarter profit by $443 million Tuesday and boosted its income forecast for the remainder of the year to reflect a tax settlement with the U.S. government.

The Palo Alto-based company said the settlement increased its previously reported second-quarter profit by 15 cents a share, bringing net income for the three months that ended April 30 to $1.9 billion, or 66 cents a share. HP’s net income was $966 million, or 33 cents, in the same period of 2005.

The settlement, signed with the Internal Revenue Service on June 1, also prompted HP to raise its profit forecast for the fiscal year by 15 cents a share. The company expects profit before amortization and other costs to be $2.19 to $2.23 a share, versus $2.04 to $2.08 forecast in May.

Analysts on average had been expecting a profit of $2.08 a share for the fiscal year, which ends in October, according to a survey by Thomson Financial.

The settlement is related to an audit of the company’s returns for the years 1996 through 1998. The deal was reached before HP filed its financial statement for the second quarter, which required HP to account for the gain in that period.

HP shares fell 69 cents, or 2.2%, to $30.90.