Strong sales of notebook computers contributed to a 26 per cent rise in profits at Hewlett-Packard, confirming the computer maker's place at the top of the PC tree ahead of previous title holder Dell.

Net income for the quarter ending Jan 31 was $1.5 billion (£770 million), or 55 cents a share, up from $1.2 billion, or 42 cents a share, a year ago. Revenue was up 11 per cent, from $22.7 billion to $25.1 billion.

The results suggested that the company was showing little ill-effect from the scandal over the investigation of leaks from the company's board last year, and that the restructuring moves commenced by chief executive Mark Hurd in the middle of 2005 are paying off.

"This was a solid start to the year," Mr Hurd, the chief executive, said in a conference call. "Revenue grew, margins expanded, and we continued to take market share."

The brightest spot was personal computers, with sales in the PC unit up 17 per cent to $8.7 billion - three times the growth rate for the industry as a whole, Mr Hurd said.

Revenue at the company's imaging and printing division also grew by 7 per cent to $7 billion, while the software business posted an 81 per cent jump in sales bolstered by the recent acquisition of Mercury Interactive Corp.

The company announced further plans to cut costs, with plans to freeze its pension plan for US employees and reduce eligibility for its retiree medical programme, which would result in a gain of $500 million. The saving would offset the charge of a new early retirement plan which was expected to be taken up by about 3,000 employees, the company said.

Shares dropped slightly in after hours trading to $42.65 after closing at $43.13.

Some analysts were critical of the results, suggesting that strong sales in the company's PC unit papered over weakness in other areas, and that many of the cost reductions associated with the restructuring had already been derived, making future growth difficult.

A M Sacconaghi, an analyst with Sanford C Bernstein & Company, said that once 81 per cent increase in sales from the company's software unit was removed, revenue growth was about 6 per cent.

"That's a pretty anaemic performance - PCs were bailing out what was, quite frankly, a rather mediocre performance," he said.

"Certainly H-P has done a great job over the last two years, and is in a good position to continue to do well over the next year and a half but profit growth is slowing," Brent Bracelin, an analyst with Pacific Crest Securities, said.

Other analysts, however, focused on the growth profit margins at various of the company's units.

Sales of notebooks, which have higher margins than desktops, grew by 40 per cent, and even in sales to large companies, which have tightened IT spending, profit margins were up to 9.3 per cent from 7.7 per cent a year ago.

"In each of their businesses there was an opportunity for them to take advantage of, and in most cases, they did," Laura Conigliaro, an analyst with Golman Sachs, said.

The company said it expected revenue for the current quarter to increase by 8.6 per cent to $24.5 billion, and that revenue for the entire fiscal year would be up by 8 per cent to $99 billion.

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