HP Reports Increases in Fourth Quarter Results

PALO ALTO, CA—Nov. 22, 2010—HP released its financial results for the fourth fiscal quarter ended Oct. 31, 2010, with net revenue of $33.3 billion, up 8 percent from the prior-year period, including a slight negative currency impact of about one percentage point.

"HP proved once again that it is able to execute given its market strengths and technology leadership," said Leo Apotheker, HP president and CEO. "I have seen firsthand that we have talented people who are focused on delivering value for our customers. Our market opportunity is vast, and I am confident that we will extend our leadership into the future.”

"HP continued to execute in the fourth quarter, delivering growth, expanding margins and increasing earnings per share double digits," said Cathie Lesjak, HP executive vice president and chief financial officer. "We continue to invest in the business, in sales and in R&D, while driving further efficiencies."

Full Year Fiscal 2010

Net revenue for the full fiscal year 2010 was $126.0 billion, up 10 percent compared with the prior-year or up 8 percent when adjusted for the effects of currency. GAAP operating profit was $11.5 billion and non-GAAP operating profit was $14.4 billion in the prior-year. Non-GAAP financial information excludes $2.1 billion of adjustments on an after-tax basis related to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

Fourth Quarter Fiscal 2010

Fourth quarter revenue was up 10 percent in the Americas to $15.1 billion. Revenue was up 6 percent in Europe, the Middle East and Africa and up 8 percent in Asia Pacific to $12.4 billion and $5.8 billion, respectively. When adjusted for the effects of currency, revenue was up 9 percent in the Americas, up 11 percent in Europe, the Middle East and Africa and up 3 percent in Asia Pacific. Revenue from outside of the United States in the fourth quarter accounted for 64 percent of total HP revenue, with revenue in the BRIC countries (Brazil, Russia, India and China) increasing 12 percent while accounting for 10 percent of total HP revenue.

Services

Services revenue increased 0.4 percent to $9.0 billion in the fourth quarter. Revenue in each of Infrastructure Technology Outsourcing, Application Services and Technology Services grew roughly 1 percent. Business Process Outsourcing revenue was down 11 percent. Operating profit was $1.5 billion, or 16.7 percent of revenue, up from $1.4 billion, or 16.2 percent of revenue, in the prior-year period.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported total revenue of $5.3 billion in the fourth quarter, up 25 percent. Industry Standard Server revenue increased 32 percent, while Storage revenue increased 14 percent and Business Critical Systems revenue grew 10 percent. ESS blade revenue was up 51 percent. Operating profit was $730 million, or 13.9 percent of revenue, up from $481 million, or 11.4 percent of revenue, in the prior-year period.

HP Software

HP Software revenue increased roughly 1 percent to $974 million in the fourth quarter. Business Technology Optimization revenue increased 4 percent, and Other Software revenue decreased 6 percent. Operating profit was $247 million, or 25.4 percent of revenue, up from $234 million, or 24.2 percent of revenue, in the prior-year period.

Personal Systems Group

Personal Systems Group (PSG) revenue increased 4 percent to $10.3 billion in the fourth quarter. HP maintained the leading market share position in PCs worldwide with a 2 percent increase in unit shipments. Notebook revenue for the quarter was down 3 percent from the prior year period, while Desktop revenue increased 13 percent. Commercial client revenue was up 20 percent, while Consumer client revenue declined 10 percent. Operating profit improved to $568 million, or 5.5 percent of revenue, up from $460 million, or 4.7 percent of revenue, in the prior-year period.

Imaging and Printing Group

Imaging and Printing Group (IPG) revenue increased 8 percent to $7.0 billion in the fourth quarter. Supplies revenue was up 6 percent, while commercial hardware revenue and consumer hardware revenue were up 22 percent and down 2 percent, respectively. Printer unit shipments increased 14 percent, with commercial printer hardware units up 43 percent and consumer printer hardware units up 7 percent. Operating profit was $1.2 billion, or 17.4 percent of revenue, versus $1.2 billion, or 18.1 percent of revenue, in the prior-year period.

Corporate Investments

HP Networking revenue increased 227 percent overall in the fourth quarter including the impact of the 3Com acquisition, which was completed last April. ProCurve revenue grew 50 percent over the prior-year period.

HP Financial Services

HP Financial Services (HPFS) revenue increased 11 percent to $809 million in the fourth quarter. Financing volume increased 11 percent, and net portfolio assets increased 14 percent. Operating profit was $73 million, up from $66 million in the prior-year period.

Asset management

HP generated $3.2 billion in cash flow from operations for the fourth quarter. Inventory ended the quarter at $6.5 billion, with days of inventory flat year over year at 23 days. Accounts receivable of $18.5 billion was up 2 days year over year. Accounts payable ended the quarter at $14.4 billion, down 5 days from the prior-year period. HP's dividend payment of $0.08 per share in the fourth quarter resulted in cash usage of $181 million. HP also utilized $4.0 billion of cash during the quarter to repurchase approximately 96 million shares of common stock in the open market. HP exited the quarter with $11.0 billion in gross cash.

Outlook

For the first quarter of fiscal 2011, HP estimates revenue of approximately $32.8 billion to $33.0 billion, GAAP diluted EPS in the range of $1.06 to $1.08, and non-GAAP diluted EPS in the range of $1.28 to $1.30. First quarter fiscal 2011 GAAP and non-GAAP diluted EPS estimates include a one-time gain of approximately $0.04 per share primarily related to the disposition of real estate.

First quarter fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.22 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.

HP expects full year fiscal 2011 revenue in the range $132 billion to $133.5 billion, GAAP diluted EPS in the range of $4.42 to $4.52, and non-GAAP diluted EPS in the range of $5.16 to $5.26. GAAP and non-GAAP diluted EPS includes a one-time gain of approximately $0.04 per share primarily related to the disposition of real estate.

Full year fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.74 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.

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 Q4 FY10 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2010q4webcast.

About HP
HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world's largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. More information about HP is available at www.hp.com.

Source: Financial release.