HP Reports First Quarter 2009 Results

World’s biggest PC company HP has reported its first fiscal quarter of 2009. The sloping economy is evidently also affecting the big ones and otherwise big profit makers like HP. The earnings was, much like the rest, down. From Q1 2008 when the profit was 2.1 billion dollar, the net earning has dropped 13 % to 1.9 billion dollar. This isn’t just a result from low sales, but also reduced margins. Based on these results HP predicts reduced sales of 2-5% in 2009.

Press release after the break; 

HP Reports First Quarter 2009 Results

First quarter net revenue up 1%, or 4% in local currency, from a year earlier to $28.8 billion;

First quarter GAAP operating profit down 5% to $2.5 billion;

$0.75 GAAP earnings per share, down from $0.80 a year earlier;

First quarter non-GAAP operating profit up 10% to $3.1 billion;

$0.93 non-GAAP earnings per share, up from $0.86 a year earlier;

Services posts record operating profit of $1.1 billion;

EDS integration ahead of plan

PALO ALTO, Calif.–(BUSINESS WIRE)–Feb. 18, 2009– HP (NYSE:HPQ) today announced financial results for its first fiscal quarter ended Jan. 31, 2009, with net revenue of $28.8 billion, up 1% from a year earlier and up 4% when adjusted for the effects of currency.

In the first quarter, GAAP operating profit was $2.5 billion and GAAP diluted earnings per share (EPS) was $0.75, down from $0.80 in the prior-year period. Non-GAAP operating profit was $3.1 billion, with non-GAAP diluted EPS of $0.93, up from $0.86 in the prior-year period. Non-GAAP financial information excludes $431 million of adjustments on an after-tax basis, or $0.18 per diluted share, related primarily to amortization of purchased intangible assets, restructuring charges and acquisition-related charges. GAAP and Non-GAAP diluted EPS include $0.03 of charges related to currency hedging losses.

“HP is a market leader executing well in a tough market,” said Mark Hurd, HP chairman and chief executive officer. “Our market strength, disciplined cost management and diverse portfolio allowed us to differentiate HP in the global marketplace and gain share in key markets.”

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.

Revenue grew 11% in the Americas to $12.4 billion. Revenue declined 3% in Europe, the Middle East and Africa and 11% in Asia Pacific to $12.0 billion and $4.4 billion, respectively. When adjusted for the effects of currency, revenue grew 13% in the Americas and 1% in Europe, the Middle East and Africa while declining 9% 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) declining 22% over the prior-year period while accounting for 7% of total HP revenue.

Personal Systems Group

Personal Systems Group (PSG) revenue declined 19% to $8.8 billion, with unit shipments down 4%. Notebook revenue for the quarter was down 13%, while Desktop revenue declined 25%. Commercial client revenue was down 19%, while Consumer client revenue decreased 18%. Operating profit was $435 million, or 5.0% of revenue, down from $628 million, or 5.8% of revenue, in the prior-year period.

Imaging and Printing Group

Imaging and Printing Group (IPG) revenue declined 19% to $6.0 billion. Supplies revenue was down 7%, while Commercial hardware revenue and Consumer hardware revenue declined 34% and 37%, respectively. Printer unit shipments decreased 33%, with Consumer printer hardware units down 31% and Commercial printer hardware units down 39%. Operating profit was $1.1 billion, or 18.5% of revenue, versus $1.1 billion, or 15.5% of revenue, in the prior-year period.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported total revenue of $3.9 billion, down 18%. Storage revenue declined 7% with the midrange EVA product line down 7%. Industry Standard Server revenue and Business Critical Systems revenue declined 22% and 17%, respectively, while ESS blade revenue grew 4%. Operating profit was $405 million, or 10.3% of revenue, down from $673 million, or 14.0% of revenue, in the prior-year period.

Services

Services revenue increased 116% to $8.7 billion due primarily to the EDS acquisition. Revenue in Technology Services was flat. ITO, Application Services and BPO posted revenue of $3.9 billion, $1.6 billion and $743 million, respectively. Operating profit was $1.1 billion, or 12.8% of revenue, up from $499 million, or 12.3% of revenue, in the prior-year period.

HP Software

HP Software revenue declined 7% to $878 million. Business Technology Optimization portfolio revenue declined 4% while Other Software revenue was down 14%. Operating profit was $140 million, or 15.9% of revenue, up from $49 million, or 5.2% of revenue, in the prior-year period.

HP Financial Services

HP Financial Services (HPFS) reported revenue of $636 million, down 1% from the prior-year period. Financing volume increased 2%, and net portfolio assets declined 3%. Operating margin was 6.4% of revenue, down from 6.7% in the prior-year period.

Asset management

HP generated $1.1 billion in cash flow from operations for the first quarter. Inventory ended the quarter at $7.6 billion, down 2 days. Accounts receivable of $14.8 billion was up 7 days. Accounts payable ended the quarter at $11.2 billion, down 1 day. HP’s dividend payment of $0.08 per share in the first quarter resulted in cash usage of $193 million. HP utilized $1.2 billion of cash during the first quarter to repurchase approximately 34 million shares of common stock in the open market. HP exited the quarter with $11.3 billion in gross cash.

Outlook

HP estimates second quarter FY09 revenue will decline approximately two to three percent from the prior-year period.

Second quarter FY09 GAAP diluted EPS is expected to be approximately $0.70 to $0.72, and non-GAAP diluted EPS is expected to be approximately $0.84 to $0.86. Second quarter FY09 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.14 per share, related primarily to the amortization of purchased intangibles and restructuring charges.

HP estimates full year FY09 revenue will decline approximately two to five percent from the prior-year period.

Full year FY09 GAAP diluted EPS is expected to be approximately $3.19 to $3.31, and non-GAAP diluted EPS is expected to be approximately $3.76 to $3.88. FY09 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.57 per share, related primarily to the amortization of purchased intangibles and restructuring charges.

HP’s outlook for the second quarter of FY09 and the full year FY09 assumes that first quarter FY09 market conditions will persist. In addition, HP has assumed that currency exchange rates will have an unfavorable year-over-year impact on revenue of approximately 7 or 8 percentage points for the second quarter of FY09 and the full year FY09.

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 Q1 FY09 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q12009webcast.

About HP

HP, the world’s largest technology company, provides printing and personal computing products and IT services, software and solutions that simplify the technology experience for consumers and businesses. More information about HP is available at http://www.hp.com/.

Use of non-GAAP financial information

To supplement HP’s consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash. HP also provides forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP management compensates for those limitations, and the substantive reasons why HP management believes that these non-GAAP measures provide useful information to investors is included under “Use of Non-GAAP Financial Measures” after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for operating profit, operating margin, net earnings, diluted earnings per share, or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements

This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, share repurchases, acquisition synergies, currency exchange rates or other financial items; any statements of the plans, strategies, and objectives of management for future operations, including execution of cost reduction programs and restructuring and integration plans; any statements concerning the expected development, performance or market share relating to products or services; any statements regarding macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by HP and its suppliers, customers and partners; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of cost reduction programs and restructuring and integration plans; the possibility that the expected benefits of business combination transactions may not materialize as expected; the resolution of pending investigations, claims and disputes; and other risks that are described in HP’s Annual Report on Form 10-K for the fiscal year ended October 31, 2008 and HP’s other filings with the Securities and Exchange Commission. As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2009. In particular, determining HP’s actual tax balances and provisions as of January 31, 2009 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP’s Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.