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HP Reports Net Revenue Increase in Second Quarter

May 18, 2010
PALO ALTO, CA—May 18, 2010—HP (HPQ) today announced financial results for its second fiscal quarter ended April 30, 2010, with net revenue of $30.8 billion, up 13% from a year earlier including a favorable currency benefit of four percentage points.

In the second quarter, GAAP diluted earnings per share (EPS) was $0.91, up from $0.71 in the prior-year period. Non-GAAP diluted EPS was $1.09, up from $0.86 in the prior-year period. Non-GAAP financial information excludes after-tax costs of approximately $0.18 per share and $0.15 per share in the second quarter of fiscal 2010 and 2009, respectively, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.

"HP had an exceptional quarter with strong performance across every region," said Mark Hurd, HP chairman and chief executive officer. "We've built the best portfolio in the industry, and our customers are responding. We're winning in the marketplace, investing for the future and confident in the enormous opportunity that lies ahead."
 
Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below. Unless otherwise noted, all growth rates included in the narrative below reflect year-over-year comparisons.

Second quarter revenue was up 11% in the Americas to $13.5 billion. Revenue was up 11% in Europe, the Middle East and Africa and up 19% in Asia Pacific to $11.8 billion and $5.5 billion, respectively. When adjusted for the effects of currency, revenue was up 9% in the Americas, up 7% in Europe, the Middle East and Africa and up 10% in Asia Pacific. Revenue from outside of the United States in the second quarter accounted for 66% of total HP revenue, with revenue in the BRIC countries (Brazil, Russia, India and China) increasing 25% while accounting for 10% of total HP revenue.

"HP drove double-digit revenue growth and improving profits, contributing to our twentieth consecutive quarter of year-over-year operating margin expansion," said Cathie Lesjak, HP executive vice president and chief financial officer. "With the improving demand environment, we are accelerating investments for growth while raising our full-year outlook."

Services

Services revenue increased 2% to $8.7 billion. Infrastructure Technology Outsourcing revenue increased 6%, while revenue in Technology Services and Business Process Outsourcing were roughly flat year over year. Application Services revenue was down 2% versus the prior-year period. Operating profit was $1.4 billion, or 15.9% of revenue, up from $1.2 billion, or 13.8% of revenue, in the prior-year period.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported total revenue of $4.5 billion, up 31%. Industry Standard Server revenue increased 54%, while Storage revenue increased 16% with the midrange EVA product line up 3%. Business Critical Systems revenue declined 17%, while ESS blade revenue was up 45%. Operating profit was $571 million, or 12.6% of revenue, up from $250 million, or 7.2% of revenue, in the prior-year period.
 

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