PALO ALTO, Calif----HP NYSE:HPQ today announced financial results for its third fiscal
quarter ended July 31, 2007, with net revenue of $25.4 billion,
representing growth of 16% year over year, or 12% when adjusted for the
effects of currency.
GAAP operating profit was $2.1 billion and GAAP diluted earnings per
share EPS was $0.66, up from $0.48 in the prior-year period. Non-GAAP
operating profit was $2.3 billion, with non-GAAP diluted EPS of $0.71 up
from $0.52 in the prior-year period. Non-GAAP financial information
excludes $134 million of adjustments on an after-tax basis, or $0.05 per
diluted share, related primarily to amortization of purchased
intangibles. GAAP and non-GAAP financial information include all
stock-based compensation expense in both current and prior-year periods.
“HP’s latest
results demonstrate continued strength across each of our key businesses
and geographies with our best revenue growth since 2000,”
said Mark Hurd, HP chairman and chief executive officer. “We
are executing increasingly well in creating demand for our innovative
products and services, and we are continuing to become a more efficient
organization.”
|
|
|
|
|
|
|
|
|
Q3 FY07
|
Q3 FY06
|
Y/Y
|
|
|
Net revenue $B
|
$ 25.4
|
$ 21.9
|
16%
|
|
|
GAAP operating margin
|
8.3%
|
6.9%
|
1.4 pts
|
|
|
GAAP net earnings $B
|
$ 1.8
|
$ 1.4
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29%
|
|
|
GAAP diluted EPS
|
$0.66
|
$0.48
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38%
|
|
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Non-GAAP operating margin
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9.0%
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7.6%
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1.4 pts
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|
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Non-GAAP net earnings $B
|
$ 1.9
|
$ 1.5
|
29%
|
|
|
Non-GAAP diluted EPS
|
$0.71
|
$0.52
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37%
|
Information about HP’s use of non-GAAP
financial information is provided under “Use
of non-GAAP financial information” below.
During the quarter, on a year-over-year basis, revenue in the Americas
grew 14% to $11.1 billion, revenue in Europe, the Middle East and Africa
grew 16% to $9.7 billion, and revenue in Asia Pacific grew 22% to $4.6
billion. When adjusted for the effects of currency, revenue in the
Americas grew 13%, revenue in Europe, the Middle East and Africa grew
9%, and revenue in Asia Pacific grew 18%. Revenue from outside of the
United States was 65%, with revenue in the BRIC countries Brazil,
Russia, India and China growing 35% over the prior year in the third
quarter and now accounting for more than 8% of revenue.
Personal Systems Group
Personal Systems Group PSG revenue grew 29% year over year to $8.9
billion, with unit shipments up 33% on a year-over-year basis. These
results bring PSG’s year-to-date revenue
growth to nearly $5 billion. Notebook revenue grew 54% over the
prior-year period, while desktop revenue grew 12%. Commercial client
revenue grew 19% year-over-year, while Consumer client revenue increased
46%. Operating profit was $519 million, or 5.8% of revenue, up from $275
million, or 4.0% of revenue, in the prior-year period.
Imaging and Printing Group
Imaging and Printing Group IPG revenue grew 8% year over year to $6.8
billion. On a year-over-year basis, supplies revenue grew 9%, commercial
hardware revenue grew 6% and consumer hardware revenue grew 10%. Printer
unit shipments increased 10% year over year, with consumer printer
hardware units up 8% and commercial printer hardware units up 17%.
Momentum in key growth initiatives continued, with printer-based
multi-function devices up 76%. Operating profit was $981 million, or
14.5% of revenue, up from $884 million, or 14.2% of revenue, in the
prior-year period.
Enterprise Storage and Servers
Enterprise Storage and Servers ESS reported revenue of $4.5 billion,
up 10% over the prior-year period. On a year-over-year basis,
industry-standard server revenue increased 16%, with x86 blade revenue
up 81%. Storage revenue grew 6%, with revenue growth of 7% in external
disk storage, including 14% in the midrange EVA line, and partially
offset by a decline in the tape business. Business critical systems
revenue declined 3%, with Integrity systems growth of 71% offset by
declines in PA-RISC and Alpha. Operating profit was $464 million, or
10.2% of revenue, up from $296 million, or 7.2% of revenue, in the
prior-year period.
HP Services
HP Services HPS revenue increased 8% year over year to $4.2 billion.
Revenue in Technology Services grew 5% over the prior-year period, while
Consulting and Integration revenue rose 11%, and Outsourcing Services
revenue rose 11%. Operating profit was $430 million, or 10.3% of
revenue, up from $364 million, or 9.4% of revenue, in the prior-year
period.
HP Software
HP Software revenue grew 74% over the prior-year period to $554 million,
led by strong growth from the businesses acquired in HP’s
purchase of Mercury Interactive. On a year-over-year basis, HP OpenView
grew 14% excluding Mercury. Operating profit was $81 million, or 14.6%
of revenue, up from $13 million, or 4.1% of revenue, in the prior-year
period.
Financial Services
HP Financial Services HPFS reported revenue of $582 million, an
increase of 12% year over year. Financing volume and net portfolio
assets increased 7% and 8%, respectively, over the prior-year period.
Operating margin was 6.7% of revenue, comparable to the same period last
year.
Asset management
HP generated $1.9 billion in cash flow from operations. Inventory ended
the quarter at $8.0 billion, up $728 million sequentially and up $542
million year over year. Accounts receivable increased $268 million
sequentially and increased $2.2 billion over the prior-year period to
$11.8 billion. Accounts payable increased $168 million sequentially and
$978 million over the prior-year period to $11.7 billion. HP’s
dividend payment of $0.08 per share in the second quarter resulted in
cash usage of $209 million. HP utilized $2.5 billion of cash during the
third quarter to repurchase approximately 55 million shares of common
stock from the open market. HP exited the quarter with $12.5 billion in
gross cash, which includes cash and cash equivalents of $12.5 billion,
short-term investments of $40 million, and certain long-term investments
of $23 million.
Outlook
HP estimates Q4 FY07 revenue will be approximately $27.0 billion to
$27.2 billion.
Fourth quarter FY07 GAAP diluted EPS is expected to be in the range of
$0.75 to $0.76, and non-GAAP diluted EPS is expected to be in the range
of $0.80 to $0.81. Non-GAAP diluted EPS estimates exclude after-tax
costs of approximately $0.05 per share, related primarily to the
amortization of purchased intangible assets.
HP estimates FY07 revenue will be approximately $103.0 billion to $103.2
billion.
FY07 GAAP diluted EPS is expected to be in the range of $2.61 to $2.62,
and FY07 non-GAAP diluted EPS is expected to be in the range of $2.86 to
$2.87. FY07 non-GAAP diluted EPS estimates exclude after-tax costs of
approximately $0.25 per share, related primarily to the amortization of
purchased intangible assets, in-process research and development
charges, restructuring charges and pension curtailment gains.
More information on HP’s quarterly earnings,
including additional financial analysis and an earnings overview
presentation, is available on HP’s Investor
Relations website at www.hp.com/investor/home.
HP’s Q3 FY07 earnings conference call is
accessible via an audio webcast at www.hp.com/investor/q32007webcast.
About HP
HP focuses on simplifying technology experiences for all of its
customers – from individual consumers to the
largest businesses. With a portfolio that spans printing, personal
computing, software, services and IT infrastructure, HP is among the
world’s largest IT companies, with revenue
totaling $100.5 billion for the four fiscal quarters ended July 31,
2007. More information about HP is available at www.hp.com.
Use of non-GAAP financial information
To supplement HP’s consolidated condensed
financial statements presented on a GAAP basis, HP provides non-GAAP
operating profit, non-GAAP operating margin, non-GAAP net earnings,
non-GAAP diluted earnings per share and gross cash. HP also provides
forecasts of non-GAAP diluted earnings per share. A reconciliation of
the adjustments to GAAP results for this quarter and prior periods is
included in the tables below. In addition, an explanation of the ways in
which HP management uses these non-GAAP measures to evaluate its
business, the substance behind HP management’s
decision to use these non-GAAP measures, the material limitations
associated with the use of these non-GAAP measures, the manner in which
HP management compensates for those limitations, and the substantive
reasons why HP management believes that these non-GAAP measures provide
useful information to investors is included under “Use
of Non-GAAP Financial Measures” after the
tables below. This additional non-GAAP financial information is not
meant to be considered in isolation or as a substitute for operating
profit, operating margin, net earnings, diluted earnings per share, or
cash and cash equivalents prepared in accordance with GAAP.
Forward-looking statements
This news release contains forward-looking statements that involve
risks, uncertainties and assumptions. If the risks or uncertainties ever
materialize or the assumptions prove incorrect, the results of HP may
differ materially from those expressed or implied by such
forward-looking statements and assumptions. All statements other than
statements of historical fact are statements that could be deemed
forward-looking statements, including but not limited to any projections
of revenue, margins, expenses, earnings, tax provisions, cash flows,
benefit obligations, share repurchases or other financial items; any
statements of the plans, strategies, and objectives of management for
future operations, including execution of cost reduction programs and
restructuring plans; any statements concerning the expected development,
performance or market share relating to products or services; any
statements regarding pending investigations, claims or disputes; any
statements of expectation or belief; and any statements of assumptions
underlying any of the foregoing. Risks, uncertainties and assumptions
include macroeconomic and geopolitical trends and events; execution and
performance of contracts by suppliers, customers and partners; the
challenge of managing asset levels, including inventory; the difficulty
of aligning expense levels with revenue changes; assumptions related to
pension and other post-retirement costs; expectations and assumptions
relating to the execution and timing of cost reduction programs and
restructuring plans; the resolution of pending investigations, claims
and disputes; and other risks that are described in HP’s
Quarterly Report on Form 10-Q for the fiscal quarter ended April 30,
2007 and HP’s other filings with the
Securities and Exchange Commission, including HP’s
Annual Report on Form 10-K for the fiscal year ended October 31, 2006.
As in prior quarters, the financial information set forth in this
release, including tax-related items, reflects estimates based on
information available at this time. While HP believes these estimates to
be meaningful, these amounts could differ materially from actual
reported amounts in HP’s Quarterly Report on
Form 10-Q for the fiscal quarter ended July 31, 2007. In particular,
determining HP’s actual tax balances and
provisions as of July 31, 2007 and for the fiscal quarter then ended
requires extensive internal and external review of tax data including
consolidating and reviewing the tax provisions of numerous domestic and
foreign entities, which is being completed in the ordinary course of
preparing HP’s Form 10-Q. HP assumes no
obligation and does not intend to update these forward-looking
statements.
Note to editors: More news from HP, including links to RSS feeds, is
available at www.hp.com/hpinfo/newsroom/.
© 2007 Hewlett-Packard Development Company,
L.P. The information contained herein is subject to change without
notice. HP shall not be liable for technical or editorial errors or
omissions contained herein.
|
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
|
|
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
|
|
Unaudited
|
|
In millions except per share amounts
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
July 31,
2007
|
|
April 30,
2007
|
|
July 31,
2006
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
25,377
|
|
|
$
|
25,534
|
|
|
$
|
21,890
|
|
|
|
|
|
|
|
|
|
|
Costs and expensesa:
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
19,164
|
|
|
|
19,283
|
|
|
|
16,472
|
|
|
Research and development
|
|
|
917
|
|
|
|
903
|
|
|
|
920
|
|
|
Selling, general and administrative
|
|
|
3,002
|
|
|
|
3,044
|
|
|
|
2,830
|
|
|
Amortization of purchased intangible assets
|
|
|
183
|
|
|
|
212
|
|
|
|
153
|
|
|
In-process research and development charges
|
|
|
-
|
|
|
|
19
|
|
|
|
-
|
|
|
Restructuring
|
|
|
5
|
|
|
|
453
|
|
|
|
5
|
|
|
Pension curtailments and pension settlements, net
|
|
|
-
|
|
|
|
508
|
|
|
|
-
|
|
|
Total costs and expenses
|
|
|
23,261
|
|
|
|
23,406
|
|
|
|
20,380
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
2,116
|
|
|
|
2,128
|
|
|
|
1,510
|
|
|
|
|
|
|
|
|
|
|
Interest and other, net
|
|
|
165
|
|
|
|
87
|
|
|
|
221
|
|
|
Gains on investments
|
|
|
5
|
|
|
|
13
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Earnings before taxes
|
|
|
2,286
|
|
|
|
2,228
|
|
|
|
1,738
|
|
|
|
|
|
|
|
|
|
|
Provision for taxesb
|
|
|
508
|
|
|
|
453
|
|
|
|
363
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
1,778
|
|
|
$
|
1,775
|
|
|
$
|
1,375
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.68
|
|
|
$
|
0.67
|
|
|
$
|
0.50
|
|
|
Diluted
|
|
$
|
0.66
|
|
|
$
|
0.65
|
|
|
$
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
|
$
|
0.16
|
|
|
|
-
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to compute net earnings per share:
|
|
|
|
Basic
|
|
|
2,600
|
|
|
|
2,638
|
|
|
|
2,768
|
|
|
Diluted
|
|
|
2,697
|
|
|
|
2,731
|
|
|
|
2,839
|
|
|
|
|
|
|
|
|
|
|
a Stock-based compensation expense included under SFAS 123R was
as follows:
|
|
|
|
Cost of sales
|
|
$
|
34
|
|
|
$
|
42
|
|
|
$
|
35
|
|
|
Research and development
|
|
|
19
|
|
|
|
18
|
|
|
|
17
|
|
|
Selling, general and administrative
|
|
|
91
|
|
|
|
94
|
|
|
|
|
 |
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