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HP Reports 11% Revenue Growth, Commercial Printer Sales Jump

August 19, 2010
PALO ALTO, CA—Aug 19, 2010—HP today announced financial results for its third fiscal quarter ended July 31, 2010, with net revenue of $30.7 billion, up 11.4% from a year earlier, including a favorable currency benefit of approximately one percentage point. It's third-quarter GAAP operating profit up 5% to $2.3 billion; non-GAAP operating profit up 14% to $3.4 billion.

Imaging and Printing Group
Imaging and Printing Group (IPG) revenue increased 9% to $6.2 billion. Supplies revenue was up 5%, while Commercial hardware revenue and Consumer hardware revenue increased 28% and 4%, respectively. Printer unit shipments increased 16%, with Commercial printer hardware units up 44% and Consumer printer hardware units up 9%. Operating profit was $1.0 billion, or 16.9% of revenue, versus $960 million, or 17.0% of revenue, in the prior-year period.

"The broad-based strength of HP's Q3 performance further demonstrates the power of our strategy and the discipline of our execution," said Cathie Lesjak, HP chief financial officer and interim chief executive officer. "We raised our full-year outlook and are continuing to build momentum in driving out costs, investing for profitable growth and capitalizing on HP's competitive advantages in the marketplace."

Third quarter revenue was up 12% in the Americas to $14.2 billion. Revenue was up 9% in Europe, the Middle East and Africa and up 14% in Asia Pacific to $10.9 billion and $5.6 billion, respectively. When adjusted for the effects of currency, revenue was up 11% in the Americas, up 12% in Europe, the Middle East and Africa and up 8% in Asia Pacific.

Revenue from outside of the United States in the third quarter accounted for 63% of total HP revenue, with revenue in the BRIC countries (Brazil, Russia, India and China) increasing 21% while accounting for 11% of total HP revenue.

Services
Services revenue increased 1% to $8.6 billion. Infrastructure Technology Outsourcing revenue and Business Process Outsourcing each increased 1%, while revenue in Technology Services declined roughly 1%. Application Services revenue was up 4% versus the prior-year period. Operating profit was $1.4 billion, or 15.9% of revenue, up from $1.3 billion, or 15.3% of revenue, in the prior-year period.

Enterprise Storage and Servers
Enterprise Storage and Servers (ESS) reported total revenue of $4.4 billion, up 19%. Industry Standard Server revenue increased 31%, while Storage revenue increased 10% and Business Critical Systems revenue declined 15%. ESS blade revenue was up 29%. Operating profit was $549 million, or 12.3% of revenue, up from $381 million, or 10.2% of revenue, in the prior-year period.

HP Software
HP Software revenue increased 2% to $863 million. Business Technology Optimization revenue increased 3%, and Other Software revenue decreased 1%. Operating profit was $183 million, or 21.2% of revenue, up from $153 million, or 18.1% of revenue, in the prior-year period.

Personal Systems Group

Personal Systems Group (PSG) posted a 12% increase in unit shipments and maintained the leading market share position in PCs worldwide. PSG revenue increased 17% to $9.9 billion. Notebook revenue for the quarter was up 10%, while Desktop revenue increased 27%. Commercial client revenue was up 25%, while Consumer client revenue increased 12%. Operating profit was $469 million, or 4.7% of revenue, up from $387 million, or 4.6% of revenue, in the prior-year period.

Corporate Investments
ProCurve revenue increased 42%, and HP Networking overall increased 198% year over year including the impact of the 3Com acquisition.

HP Financial Services

HP Financial Services (HPFS) revenue increased 14% to $764 million. Financing volume increased 3%, and net portfolio assets increased 13%. Operating margin was 9.4%, up from 7.9% in the prior-year period.

Asset management
HP generated $3.3 billion in cash flow from operations for the third quarter. Inventory ended the quarter at $7.2 billion, with days of inventory up to 28 from 25 in the prior-year period. Accounts receivable of $15.6 billion was down 2 days year over year. Accounts payable ended the quarter at $14.9 billion, up 2 days over the prior-year period. HP's dividend payment of $0.08 per share in the third quarter resulted in cash usage of $205 million. HP also utilized $2.6 billion of cash during the quarter to repurchase approximately 55 million shares of common stock in the open market. HP exited the quarter with $14.8 billion in gross cash.

Outlook
For the fourth quarter of fiscal 2010, HP estimates revenue of approximately $32.5 billion to $32.7 billion, GAAP diluted EPS in the range of $1.03 to $1.05, and non-GAAP diluted EPS in the range of $1.25 to $1.27. Fourth quarter fiscal 2010 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.22 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.

For the full year, HP expects revenue in the range of $125.3 billion to $125.5 billion. HP expects FY10 GAAP diluted EPS to be in the range of $3.62 to $3.64 and non-GAAP diluted EPS in the range of $4.49 to $4.51. FY10 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.87 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.

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 FY10 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2010q3webcast.

About HP
HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world's largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. More information about HP is available at www.hp.com.

 

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