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HP reports Q1 earnings: EPS beats but revenue and Q2 guidance both miss

Wednesday, February 22nd, 2012

Hewlett-Packard on Wednesday reported its fiscal first-quarter earnings, which fell short of Wall Street’s expectations. Analysts expected the computer giant to pull in $30.75 billion and $0.87 per share, and while HP’s first-quarter earnings of $0.92 per share beat the Street’s consensus, revenue dipped 7% to $30 billion and missed estimates. “In the first quarter, we delivered on our Q1 outlook and remained focused on the fundamentals to drive long-term sustainable returns,” said HP president and CEO Meg Whitman. “We are taking the necessary steps to improve execution, increase effectiveness and capitalize on emerging opportunities to reassert HP’s technology leadership.” HP anticipates its second-quarter EPS to fall between $0.88 and $0.91, below Wall Street’s consensus of $0.95 per share. Read on for HP’s press release.

HP Reports First Quarter 2012 Results

PALO ALTO, CA–(Marketwire – Feb 22, 2012) – HP (NYSE: HPQ)
First quarter non-GAAP diluted earnings per share of $0.92, down 32% from the prior-year period and above previously provided outlook of $0.83 to $0.86 per share

First quarter GAAP diluted earnings per share of $0.73, down 38% from the prior-year period and above previously provided outlook of $0.61 to $0.64 per share

First quarter net revenue of $30.0 billion, down 7% from the prior-year period

Returned $1.0 billion in cash to shareholders in the form of dividends and share repurchases
HP (NYSE: HPQ) today announced financial results for its first fiscal quarter ended January 31, 2012. For the quarter, net revenue of $30.0 billion was down 7% from the prior-year period, and down 8% when adjusted for the effects of currency.

GAAP diluted earnings per share (EPS) was $0.73, down 38% from the prior-year period. Non-GAAP diluted EPS was $0.92, down 32% from the prior-year period. First quarter non-GAAP earnings information excludes after-tax costs of $364 million, or $0.19 per diluted share, related to amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

“In the first quarter, we delivered on our Q1 outlook and remained focused on the fundamentals to drive long-term sustainable returns,” said Meg Whitman, HP president and chief executive officer. “We are taking the necessary steps to improve execution, increase effectiveness and capitalize on emerging opportunities to reassert HP’s technology leadership.”

Earnings highlights

Q1 FY12 Q1 FY11 Y/Y
GAAP net revenue ($B) $30.0 $32.3 (7%)
GAAP operating margin 6.8% 10.5% (3.7 pts)
GAAP net earnings ($B) $1.5 $2.6 (44%)
GAAP diluted EPS $0.73 $1.17 (38%)
Non-GAAP operating margin 8.6% 12.4% (3.8 pts)
Non-GAAP net earnings ($B) $1.8 $3.0 (40%)
Non-GAAP diluted EPS $0.92 $1.36 (32%)
Information about HP’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.

Trends and regional performance

In the Americas, first quarter revenue was $13.2 billion, down 9% year over year and down 8% when adjusted for the effects of currency. Europe, the Middle East and Africa revenue of $11.7 billion was down 4% year over year and down 5% when adjusted for the effects of currency. Revenue in Asia Pacific was $5.2 billion, representing a 10% decrease year over year and down 12% when adjusted for the effects of currency.
Revenue from outside of the United States in the first quarter accounted for 66% of total HP revenue. BRIC countries (Brazil, Russia, India and China) generated revenue of $3.1 billion, down 13% from the year-ago period, and representing 10% of total HP revenue.

Revenue in HP’s commercial businesses declined 4% year over year. Revenue in HP’s consumer businesses, within PSG and IPG, was collectively down 23% year over year.
Business group results

Personal Systems Group (PSG) revenue declined 15% year over year with a 5.2% operating margin. Commercial client revenue declined 7%, Consumer client revenue declined 25% and Workstations revenue was flat. Total units were down 18%, with a 19% decline in desktop units and an 18% decline in notebook units.

Services revenue of $8.6 billion grew 1% year over year with a 10.5% operating margin. Technology Services revenue grew 2%, Application and Business Services revenue was flat and IT Outsourcing revenue grew 2% year over year.

Imaging and Printing Group (IPG) revenue declined 7% year over year with a 12.2% operating margin. Commercial hardware revenue was down 5% year over year with commercial printer units down 10%. Consumer hardware revenue was down 15% year over year with a 15% decline in printer units.

Enterprise Servers, Storage and Networking (ESSN) revenue declined 10% year over year with an 11.2% operating margin. Networking revenue was flat, Industry Standard Servers revenue was down 11%, Business Critical Systems revenue was down 27% and Storage revenue was down 6% year over year.

Software revenue grew 30% year over year with a 17.1% operating margin, including the results of Autonomy. Software revenue was driven by 12% license growth, 22% support growth and 108% growth in services.

HP Financial Services revenue grew 15% year over year driven by an 8% increase in net portfolio assets and flat financing volume. The business delivered a 9.6% operating margin.
Asset management

HP generated $1.2 billion in cash flow from operations in the first quarter. Inventory ended the quarter at $7.3 billion, with days of inventory up 3 days year over year to 28 days. Accounts receivable of $15.9 billion was up 2 days year over year to 48 days. Accounts payable ended the quarter at $12.4 billion, down 2 days from the prior-year period at 48 days. HP’s dividend payment of $0.12 per share in the first quarter resulted in cash usage of $244 million. HP also utilized $780 million of cash during the quarter to repurchase approximately 29 million shares of common stock in the open market. HP exited the quarter with $8.2 billion in gross cash.
Outlook

For the second quarter of fiscal 2012, HP estimates non-GAAP diluted EPS to be in the range of $0.88 to $0.91 and GAAP diluted EPS to be in the range of $0.68 to $0.71.
Second quarter fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.20 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

There is no change to HP’s previously provided full year fiscal 2012 outlook of non-GAAP diluted EPS of at least $4.00 and GAAP diluted EPS of approximately $3.20.
Full year fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.80 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

As part of its annual financial review process, HP implemented several organizational realignments effective Q1 FY12. To provide improved visibility and comparability, HP has reflected these realignments in prior financial reporting periods on an as-if basis. These realignments resulted in, among other things, the transfer of revenue within and among various financial reporting segments and business units. The changes do not impact HP’s previously reported consolidated net revenue, earnings from operations, net earnings or earnings per share at the company level. To reflect these changes, HP released modified quarterly and annual consolidated condensed statements of earnings, segment financial results and statements of business unit revenue for fiscal 2010 and 2011, which are available on HP’s Investor Relations website at www.hp.com/investor/home.

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Former eBay chief Meg Whitman replaces Apotheker as HP CEO

Thursday, September 22nd, 2011

Former eBay CEO Meg Whitman has officially replaced Leo Apotheker as the CEO of HP. Unlike Apotheker, Whitman has experience working in the consumer market after spending 10 years with eBay. Ray Lane will assume the executive chairman position on the board of directors. “We are fortunate to have someone of Meg Whitman’s caliber and experience step up to lead HP,” Lane said. “We are at a critical moment and we need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead. Meg is a technology visionary with a proven track record of execution. She is a strong communicator who is customer focused with deep leadership capabilities. Furthermore, as a member of HP’s board of directors for the past eight months, Meg has a solid understanding of our products and markets.” Read on for the full press release from HP.

HP Names Meg Whitman President and Chief Executive Officer

Ray Lane appointed executive chairman; Léo Apotheker steps down as president, chief executive officer and director

PALO ALTO, Calif.–(BUSINESS WIRE)– HP (NYSE:HPQ – News) today announced that its board of directors has appointed Meg Whitman as president and chief executive officer.

In addition, Ray Lane has moved from non-executive chairman to executive chairman of the board of directors, and the board intends to appoint a lead independent director promptly. These leadership appointments are effective immediately and follow the decision that Léo Apotheker step down as president and chief executive officer and resign as a director of the company.

“We are fortunate to have someone of Meg Whitman’s caliber and experience step up to lead HP,” said Lane. “We are at a critical moment and we need renewed leadership to successfully implement our strategy and take advantage of the market opportunities ahead. Meg is a technology visionary with a proven track record of execution. She is a strong communicator who is customer focused with deep leadership capabilities. Furthermore, as a member of HP’s board of directors for the past eight months, Meg has a solid understanding of our products and markets.”

Whitman said, “I am honored and excited to lead HP. I believe HP matters – it matters to Silicon Valley, California, the country and the world.”

Speaking on behalf of the board, Lane said, “We very much appreciate Léo’s efforts and his service to HP since his appointment last year. The board believes that the job of the HP CEO now requires additional attributes to successfully execute on the company’s strategy. Meg Whitman has the right operational and communication skills and leadership abilities to deliver improved execution and financial performance.”

Financial analyst conference call details

HP will host an audio webcast for financial analysts and stockholders to discuss today’s announcement. Details are below:

When: Sept. 22, 2 p.m. PT / 5 p.m. ET

URL: www.hp.com/investor/briefing

It is recommended that attendees dial in 15 minutes early to avoid registration delays.

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HP purchases Palm for $1.2 billion

Wednesday, April 28th, 2010

palm-logo

Hewlett Packard today announced that it is acquiring Palm for a cool $1.2 billion, or $5.70 per share of common stock. The acquisition has been approved by the boards of both Palm and HP, but is subject to regulatory approval. All of the regulatory wrangling is expected to be completed by the end of HP’s third quarter which ends July 31, 2010. Palm CEO John Rubinstein is expected to remain at the company in an undisclosed capacity. From the wording within the press release, it appears as if webOS may live on.  Check out the full press release after the jump.

PALO ALTO, Calif. & SUNNYVALE, Calif. — (BUSINESS WIRE) — HP (NYSE: HPQ – News) and Palm, Inc. (NASDAQ: PALM – News) today announced that they have entered into a definitive agreement under which HP will purchase Palm, a provider of smartphones powered by the Palm webOS mobile operating system, at a price of $5.70 per share of Palm common stock in cash or an enterprise value of approximately $1.2 billion. The transaction has been approved by the HP and Palm boards of directors.

The combination of HP’s global scale and financial strength with Palm’s unparalleled webOS platform will enhance HP’s ability to participate more aggressively in the fast-growing, highly profitable smartphone and connected mobile device markets. Palm’s unique webOS will allow HP to take advantage of features such as true multitasking and always up-to-date information sharing across applications.

“Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices,” said Todd Bradley, executive vice president, Personal Systems Group, HP. “And, Palm possesses significant IP assets and has a highly skilled team. The smartphone market is large, profitable and rapidly growing, and companies that can provide an integrated device and experience command a higher share. Advances in mobility are offering significant opportunities, and HP intends to be a leader in this market.”

“We’re thrilled by HP’s vote of confidence in Palm’s technological leadership, which delivered Palm webOS and iconic products such as the Palm Pre. HP’s longstanding culture of innovation, scale and global operating resources make it the perfect partner to rapidly accelerate the growth of webOS,” said Jon Rubinstein, chairman and chief executive officer, Palm. “We look forward to working with HP to continue to deliver industry-leading mobile experiences to our customers and business partners.”

Under the terms of the merger agreement, Palm stockholders will receive $5.70 in cash for each share of Palm common stock that they hold at the closing of the merger. The merger consideration takes into account the updated guidance and other financial information being released by Palm this afternoon. The acquisition is subject to customary closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval of Palm’s stockholders. The transaction is expected to close during HP’s third fiscal quarter ending July 31, 2010.

Palm’s current chairman and CEO, Jon Rubinstein, is expected to remain with the company.

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