HP Posts Profit For 1st Quarter; Imaging and Printing Group Reports Revenue Up 4%
February 2010 - Hewlett-Packard has released financial results for its first fiscal quarter ended January 31, 2010, reporting net revenue of $31.2 billion, up 8% from a year earlier and up 5% when adjusted for the effects of currency. First-quarter operating profit was up 20% to $3.0 billion, with diluted earnings per share at $0.96, up 28% from $0.75 a year earlier. The company also raised its outlook for the full 2010 fiscal year, estimating that full-year fiscal 2010 revenue will be approximately $121.5 to $122.5 billion, up from its previous estimate of $118.0 to $119.0 billion.
HP's Imaging and Printing Group (IPG) reported that revenue increased 4% to $6.2 billion in the first quarter. Supplies revenue was up 1%, while Commercial hardware revenue and consumer hardware revenue increased 4% and 21% respectively. Printer unit shipments increased 16%, with commercial printer hardware units up 11% and consumer printer hardware units up 18%. Operating profit was $1.1 billion, or 17.0% of revenue, versus $1.1 billion, or 18.5% of revenue versus 2009's 1st quarter.
Noted HP Chairman and CEO Mark Hurd, "HP is well-positioned to outperform the market. The strength of our portfolio, leaner cost structure and accelerating market momentum give us the confidence to raise our full-year outlook."
Regional Performance
First-quarter revenue was up 9% in the Americas to $13.6 billion. Revenue was up 1% in Europe, the Middle East and Africa, and up26% in Asia Pacific to $12.1 billion and $5.4 billion respectively. When adjusted for the effects of currency, revenue was up 7% in the Americas, down 1% in Europe, the Middle East and Africa and up 19% in Asia Pacific. Revenue from outside of the United States in the first quarter accounted for 65% of total revenue, with revenue in the BRIC countries (Brazil, Russia, India and China) increasing 41% over the prior-year period while accounting for 10% of total HP revenue.
Enterprise Storage and Servers
Enterprise Storage and Servers (ESS) reported total revenue of $4.4 billion, up 11%. Industry Standard Server revenue increased 27%, while Storage revenue declined 3%, with the midrange EVA product line down 5%. Business Critical Systems revenue declined 22%, while ESS blade revenue was up 24%. Operating profit was $552 million, or 12.6% of revenue, up from $406 million, or 10.3% of revenue, in the prior-year period.
Personal Systems Group
The Personal Systems Group (PSG) posted a 26% increase in unit shipments and maintained the leading market share position in PCs worldwide. PSG revenue increased 20% to $10.6 billion. Notebook-computer revenue for the quarter was up 25%, while desktop-revenue increased 16%. Commercial client revenue was up 16%, while Consumer client revenue increased 26%. Operating profit was $530 million, or 5.0% of revenue, up from $436 million, or 5.0% of revenue, in the prior-year period.
Services
Services revenue decreased 1% to $8.7 billion. Infrastructure Technology Outsourcing revenue increased 2% to $3.9 billion. Technology Services revenue decreased 2% to $2.4 billion. Application Services posted revenue of $1.5 billion and Business Process Outsourcing posted revenue of $734 million down 8% and 3% respectively. Operating profit was $1.4 billion, or 15.8% of revenue, up from $1.1 billion, or 12.9% of revenue, in the prior-year period.
HP Software
HP Software revenue was flat at $878 million. Business Technology Optimization revenue decreased 1% and Other Software revenue increased 1%. Operating profit was $167 million, or 19.0% of revenue, up from $140 million, or 15.9% of revenue, in the prior-year period.
HP Financial Services
HP Financial Services (HPFS) revenue increased 13% to $719 million. Financing volume increased 30%, and net portfolio assets increased 23%. Operating margin was 9.3% of revenue, up from 6.4% in the prior-year period.
Asset management
HP generated $2.4 billion in cash flow from operations for the first quarter. Inventory ended the quarter at $6.6 billion, down 6 days. Accounts receivable of $14.5 billion was down 4 days. Accounts payable ended the quarter at $13.6 billion, up 3 days. HP's dividend payment of $0.08 per share in the first quarter resulted in cash usage of $189 million. HP also utilized $2.7 billion of cash during the quarter to repurchase approximately 54 million shares of common stock in the open market. HP exited the quarter with $13.7 billion in gross cash.
Outlook
For 2010's second quarter, HP expects revenue of approximately $29.4 to $29.7 billion, GAAP diluted EPS in the range of $0.89 to $0.91, and non-GAAP diluted EPS in the range of $1.03 to $1.05. Second quarter fiscal 2010 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.14 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.
HP estimates full year fiscal 2010 revenue will be approximately $121.5 to $122.5 billion, up from its previous estimate of $118.0 to $119.0 billion. The company expects full-year fiscal 2010 GAAP diluted EPS to be in the range of $3.79 to $3.86, up from its previous estimate of $3.65 to $3.75, and non-GAAP diluted EPS to be in the range of $4.37 to $4.44, up from its previous estimate of $4.25 to $4.35. Full-year fiscal 2010 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.58 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.
These estimates for both the second quarter and full year fiscal 2010 do not reflect the potential impact of the proposed acquisition of 3Com Corporation that HP announced on November 11, 2009.
More information on HP's quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations Web site at http://www.hp.com/investor/home.
HP's Q1 FY10 earnings conference call is accessible via an audio webcast at http://www.hp.com/investor/q12010webcast.