HP Reports Modest Revenue Decline; Imaging and Printing Group Hit Harder

HP Financial Services
HP Financial Services (HPFS) reported revenue of $670 million, down 1% from the prior-year period. Financing volume increased 12%, and net portfolio assets increased 6%. Operating margin was 7.9% of revenue, up from 7.5% in the prior-year period.

Asset management
HP generated $3.9 billion in cash flow from operations for the third quarter. Inventory ended the quarter at $5.9 billion, down 10 days. Accounts receivable of $14.7 billion was up 4 days. Accounts payable ended the quarter at $12.8 billion, down 7 days. HP’s dividend payment of $0.08 per share in the third quarter resulted in cash usage of $191 million. HP utilized $999 million of cash during the third quarter to repurchase approximately 28 million shares of common stock in the open market. HP exited the quarter with $13.7 billion in gross cash.

Outlook
HP expects fourth quarter FY09 revenue to be up approximately 8% sequentially. Fourth quarter FY09 non-GAAP diluted EPS is expected to be approximately $1.12. Fourth quarter FY09 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.15 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges. On a GAAP basis, fourth quarter FY09 diluted EPS is expected to be approximately $0.97.