Slight Revenue Increase for HP; Printing Revenue Down, but PC Revenue Up

HP Invent LogoHewlett-Packard reported results for its third quarter, with net revenue of $27.6 billion, up 1 percent from the previous year. Third-quarter GAAP earnings per share were $0.52, down 27 percent from the third quarter a year ago, and down from HP’s previously provided outlook of $0.59 to $0.63 per share. Earnings were $1 billion, down 29 percent from the $1.4 billion reported for third-quarter 2013.

The slight revenue increase was HP’s first revenue increase after 11 quarters of decline, leaving HP CEO Meg Whitman guardedly optimistic.

One dark spot was HP’s printing business – revenue from HP’s printing business was down 4 percent versus the third quarter a year ago. Total hardware shipments were down 5 percent with Commercial hardware units down 2 percent and Consumer hardware units down 6 percent. Supplies revenue was down 5 percent.

However, while printer revenue was down for the third quarter, HP’s PC segment did well: Personal Systems revenue was up 12 percent year-over-year with a 4.0 percent operating margin. Commercial revenue increased 14 percent and Consumer revenue increased 8 percent. Total units were up 13 percent with Desktops units up 9 percent and Notebooks units up 18 percent.

Other segments are as follows:

  • Enterprise Group revenue was up 2 percent year-over-year with a 14.0 percent operating margin. Industry Standard Servers revenue was up 9 percent, Storage revenue was down 4 percent, Business Critical Systems revenue was down 18 percent, Networking revenue was up 4 percent and Technology Services revenue was down 3 percent.
  • Enterprise Services revenue was down 6 percent year-over-year with a 4.1 percent operating margin. Application and Business Services revenue was down 4 percent and Infrastructure Technology Outsourcing revenue declined 8 percent.
  • Software revenue was down 5 percent year over year with a 21.2 percent operating margin. License revenue was down 16 percent, support revenue was flat, professional services revenue was down 3 percent and software-as-a-service (SaaS) revenue was up 8 percent.
  • HP Financial Services revenue was down 3 percent year-over-year with a 1 percent increase in net portfolio assets and a 14 percent increase in financing volume. The business delivered an operating margin of 9.2 percent.

Outlook

For the fiscal 2014 fourth quarter, HP estimates earnings per share to be in the range of $0.83 to $0.87. For full-year fiscal 2014, HP estimates earnings per share to be in the range of $2.75 to $2.79.

GAAP net revenue ($B)$27.6$27.21%
GAAP operating margin5.3%6.8%1.5%
GAAP net earnings ($B)$1.0$1.429%
GAAP diluted net earnings per share$0.52$0.7127%
Non-GAAP operating margin8.5%8.4%0.1%
Non-GAAP net earnings ($B)$1.70$1.681%
Non-GAAP diluted net earnings per share$0.89$0.863%
Cash flow from operations ($B)$3.6$2.736%
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