HP Reports Net Revenue Increase in Second QuarterMay 18, 2010
HP Software revenue declined 1% to $871 million. Business Technology Optimization revenue increased 3%, and Other Software revenue decreased 8%. Operating profit was $162 million, or 18.6% of revenue, up from $157 million, or 17.8% of revenue, in the prior-year period.
Personal Systems Group
Personal Systems Group (PSG) posted a 20% increase in unit shipments and maintained the leading market share position in PCs worldwide. PSG revenue increased 21% to $10.0 billion. Notebook revenue for the quarter was up 17%, while Desktop revenue increased 27%. Commercial client revenue was up 19%, while Consumer client revenue increased 25%. Operating profit was $465 million, or 4.7% of revenue, up from $378 million, or 4.6% of revenue, in the prior-year period.
Imaging and Printing Group
Imaging and Printing Group (IPG) revenue increased 8% to $6.4 billion. Supplies revenue was up 6%, while Commercial hardware revenue and Consumer hardware revenue increased 13% and 16%, respectively. Printer unit shipments increased 9%, with Commercial printer hardware units down 8% and Consumer printer hardware units up 15%. Operating profit was $1.1 billion, or 17.2% of revenue, versus $1.1 billion, or 18.2% of revenue, in the prior-year period.
ProCurve revenue increased 31%, and HP Networking overall increased 58% year-over-year including the impact of the 3Com acquisition.
HP Financial Services
HP Financial Services (HPFS) revenue increased 18% to $755 million. Financing volume increased 20%, and net portfolio assets increased 21%. Operating margin was 9.1%, up from 7.2% in the prior-year period.
HP generated $3.1 billion in cash flow from operations for the second quarter. Inventory ended the quarter at $6.4 billion, flat year over year in days of inventory. Accounts receivable of $14.8 billion was down 5 days year-over-year. Accounts payable ended the quarter at $13.4 billion, up 2 days over the prior-year period. HP's dividend payment of $0.08 per share in the second quarter resulted in cash usage of $196 million. HP also utilized $1.8 billion of cash during the quarter to repurchase approximately 35 million shares of common stock in the open market. HP exited the quarter with $14.3 billion in gross cash.
For the third quarter of fiscal 2010, HP estimates revenue of approximately $29.7 billion to $30.0 billion, GAAP diluted EPS in the range of $0.87 to $0.89, and non-GAAP diluted EPS in the range of $1.05 to $1.07. Third quarter fiscal 2010 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.18 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.
HP expects full year fiscal 2010 revenue growth of approximately eight to nine percent. HP expects full year fiscal 2010 GAAP diluted EPS to be in the range of $3.76 to $3.81, down from its previous estimate of $3.79 to $3.86, and non-GAAP diluted EPS to be in the range of $4.45 to $4.50, up from its previous estimate of $4.37 to $4.44. Full year fiscal 2010 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.69 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.
The non-GAAP diluted EPS estimates for both the third quarter and the full year fiscal 2010 include the expected dilution associated with the proposed acquisition of Palm, Inc. that HP announced on April 28, 2010. However, HP has not included any revenue associated with the Palm acquisition in its revenue outlook for either the third quarter or the full year fiscal 2010.
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 Q2 FY10 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2010q2webcast.
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