Mula - This comment comes DIRECTLY from HP's Earnings report :
"Also, we've increased our R&D commitments in key areas, like UNIX, IA-64 and high-end servers."
Paul
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biz.yahoo.com
Wednesday February 16, 4:01 pm Eastern Time
Company Press Release
HP Reports Accelerating Revenue Growth of 14 Percent
Earnings and Reinvention on Track in First Quarter
PALO ALTO, Calif.--(BUSINESS WIRE)--Feb. 16, 2000-- Hewlett-Packard Company (NYSE:HWP - news) today reported accelerating revenue growth of 14 percent for the first quarter of 2000, which ended Jan. 31, 2000. This compares with 4 percent revenue growth from continuing operations in the first quarter of last year. Net revenue from continuing operations was $11.7 billion, compared with $10.2 billion in last year's first fiscal quarter.
EPS (earnings per share) from continuing operations(1) was 80 cents on a diluted basis(2) before expenses related to the spin-off of Agilent Technologies and the incremental effect of Stock Appreciation Rights (SARs) resulting from a 46 percent rise in HP's stock price during the quarter. Including these expenses, EPS was 77 cents per share, on a diluted basis, on approximately 1.04 billion shares of common stock and common-stock equivalents outstanding. The company reported net earnings of $794 million from continuing operations for the first quarter of 2000. This compares with $882 million and EPS from continuing operations of 85 cents in the first quarter of last year, when there were no spin-off-related expenses.
''We delivered excellent results overall -- particularly in terms of revenue growth. This progress reaffirms the strategic choices we're making, and we're pleased with the market reaction to our accelerating pace,'' said Carly Fiorina, HP president and chief executive officer. ''We're closing more and more deals, especially in the Internet and wireless arenas. We're clearly the No. 1 technology provider to the consumer market, where we achieved more than 30 percent revenue growth compared to a year ago. And we continue to strengthen our market-leading position in imaging and printing.
''An intense will to win clearly was one of our best weapons against this quarter's challenges. We prevailed in spite of higher than expected memory costs, unfavorable Yen effects in the laser printer market, product transitions and softness in some markets. We're getting more out of our existing businesses, gaining market share in a number of areas, and using our global presence and full portfolio to our advantage. For example, we married the rebound in the Asian economy with new, high-quality, low-priced printing solutions, and the result was that, from a standing start a year ago, we grew inkjet revenue in Japan to nearly $100 million.
''At the same time, our reinvention efforts are taking hold across the organization. We've launched significant initiatives to reduce infrastructure costs. As promised, we've taken decisive action to strengthen our customer-facing operations, and we'll continue to make substantial progress as the year unfolds. Also, we've increased our R&D commitments in key areas, like UNIX, IA-64 and high-end servers. And we've begun refreshing our already strong work force and management bench with new talent and new ideas.
''Going forward, we have a wealth of exciting product introductions and innovations to fuel our e-services, computing and digital-imaging businesses. Our Internet deals are real and growing. We're dedicated to providing consistent and profitable revenue growth across the company, and we have what it takes to do that. We're committed to providing customers with a total experience that's second to none, and we intend to meet that commitment.''
Business Summary
Net revenue in the United States was $5.0 billion, an increase of 12 percent compared with the year-ago quarter. Revenue from outside the United States, which was 57 percent of the company's total this quarter, rose 16 percent and totaled $6.7 billion. In Europe, revenue was $4.3 billion, an increase of 7 percent. In Asia Pacific, revenue increased 46 percent and was $1.6 billion. In Latin America, revenue increased 14 percent and was $0.5 billion.
Imaging and Printing Systems
The imaging and printing segment -- which consists of laser and inkjet printing and imaging devices, and corresponding supplies and services -- grew 13 percent year over year. Supplies led overall imaging and printing revenue growth, with the home-printing category also producing solid revenue growth and outstanding unit growth. All regions posted growth, with outstanding performance coming from Asia Pacific.
HP PhotoSmart cameras, printers and scanners, as well as all-in-one products, contributed to the strong result in the home category. The HP DeskJet line of home printers continued to achieve excellent unit growth and good revenue growth, with an accelerating shift to low-end products, which drive our supplies business.
Strong revenue growth in office products was led by personal and color printer platforms. Scanners also contributed strongly, fueled by exceptional market acceptance of a comprehensive product portfolio.
Computing Systems
The computing systems segment -- which consists of a broad range of systems and solutions for business and consumers, including workstations, desktops, mobile computers, UNIX® system and PC servers, storage and software solutions -- grew 15 percent year over year. Notebook shipments grew more than 200 percent in units, and home PC shipments almost doubled compared to the year ago quarter. HP notebook PCs gained a full point in U.S. market share, according to IDC. HP business desktop PCs posted good unit growth with a small decline in revenue growth due to falling ASPs.
Server results were improved overall. Entry-level UNIX system servers, the Internet sweet spot, posted excellent revenue growth and easily outpaced the market for entry-level machines, according to IDC. High-end UNIX system servers and NT servers posted double-digit revenue growth. Midrange UNIX system revenue was flat.
''We're beginning to see progress in turning our UNIX business around,'' said Fiorina. ''We're seeing excellent growth in the Internet space, with tremendous customer acceptance of the L-Class, which spans the entry level and the midrange. While we clearly have work to do in the midrange, we're seeing good momentum, with N-Class unit growth ramping well sequentially.''
Enterprise-storage revenue -- down from the same period last year due to the transition to a new high-end storage strategy -- is growing well sequentially and winning important new business. Revenue growth for desktop storage declined, but market share is growing virtually across the board.
Software, fueled by strength in HP OpenView, the leading family of e-services management solutions, and other Internet-related software, posted good growth and important new wins.
IT Services
The IT services segment -- hardware and software services, and mission-critical, outsourcing, consulting and customer-financing services -- grew 14 percent year over year. Particularly strong were mission-critical, networking and Microsoft NT® services, and outsourcing, where HP's systems management, mission-critical capabilities and networking expertise are winning multiyear deals to operate and maintain data-center servers, telecommunications networks and distributed servers.
Costs and Expenses
Cost of goods sold this quarter was 71.5 percent of net revenue, compared with 69.1 percent in the year-ago period and 71.3 percent in the fourth quarter of fiscal 1999. Product mix, with a shift to the low end and high growth in home PCs and low-end printers; an unfavorable Yen in our laser printing business; and higher memory costs contributed to this result.
Expenses grew 15 percent against a tough comparison with last year, when expenses rose just 5 percent. Contributing to this growth were such items as unusually high SARs expense, Agilent spin-off expenses, higher revenue driven expenses, and branding and advertising expenses. Operating expenses, as reported, were 20.3 percent of net revenue. This compares with 20.2 percent in the comparable period last year and 20.7 percent in the fourth quarter of 1999.
Asset Management
Return on assets from continuing operations for the quarter was 10.2 percent compared with 10.0 percent last year at this time. Inventory was 11.6 percent of revenue compared with 12.2 percent in last year's first quarter. Trade and financing receivables were 16.6 percent of revenue, up from 16.1 percent in the year-ago quarter, but down significantly from 18.5 percent last quarter. Net property, plant and equipment was 9.9 percent of revenue compared with 11.8 percent in the year-ago quarter.
''We continue to make excellent progress on asset management in key areas,'' said Robert P. Wayman, HP executive vice president and chief financial officer. ''Inventory as a percent of revenue has continued its steady decline, and net property, plant and equipment continues its long-term trend downward. Clearly this is an area of strength for us and one that we will continue to focus on as we streamline operations, reduce asset intensity and build flexibility into our balance sheet.''
About HP
Hewlett-Packard Company -- a leading global provider of computing and imaging solutions and services for business and home -- is focused on capitalizing on the opportunities of the Internet and the proliferation of electronic services.
HP plans to spin off Agilent Technologies and distribute its shares to HP shareowners by mid-calendar year 2000. Agilent consists of HP's test and measurement, semiconductor products, chemical analysis and healthcare solutions businesses, and has leading positions in multiple market segments.
HP has 85,400 employees worldwide and had total revenue from continuing operations of $42.4 billion in its 1999 fiscal year. Information about HP, its products and the company's Year 2000 program can be found on the World Wide Web at hp.com.
More information on this quarter's earnings is available at HP's Investor Information site at hp.com. This news release contains forward-looking statements that involve risks and uncertainties that could cause results of Hewlett-Packard Company to differ materially from management's current expectations. These risks include the ability of HP to successfully manage and complete the separation into two independent companies, including the ability to retain and motivate key employees; the potential for business disruption; risks relating to the worldwide allocation of assets and people between the two companies during the process; and risks associated with the proposed spin-off of Agilent and the distribution of Agilent shares to HP shareowners.
In addition, other risks that HP faces in running its operations include: the timely development, production and acceptance of new products and services and their feature sets; the challenge of managing asset levels, including inventory; the flow of products into third-party distribution channels; the difficulty of keeping expense growth at modest levels while increasing revenues; the impact of Year 2000 on customers and suppliers; and other risks detailed from time to time in Hewlett-Packard's Securities and Exchange Commission reports, including but not limited to the annual report on Form 10-K for the year ended Oct. 31, 1999.
Microsoft NT is a U.S. registered trademark of Microsoft Corp.
UNIX is a registered trademark of the Open Group.
(1) HP is now reporting Agilent Technologies as discontinued operations, and earnings from HP's computing and imaging businesses represent HP's total earnings for this period. Earnings from continuing operations better reflect HP going forward since the financial impact of Agilent Technologies has been removed from each of the individual line items and is presented as a single net number in the income statement, balance sheet and statement of cash flows.
HP expects that Agilent's earnings from Aug. 1, 1999, through the spin-off will exceed the costs to effect the spin-off. Consequently, the excess of these earnings over the costs to effect the spin-off will not be recognized until realized earnings exceed total estimated spin-off costs. This is expected to occur in the second quarter of fiscal year 2000. Accordingly, HP's earnings from the computing and imaging businesses represent HP's total earnings for the first quarter of fiscal 2000. This, together with other accounting differences, is the reason why Agilent Technologies' separately reported results differ from the amounts reported for HP's discontinued operations.
(2) The calculation of diluted earnings per share includes the effect of common-stock equivalents, such as stock options, while the calculation of basic earnings per share does not.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Unaudited)
Three months ended Percent
(In millions except January 31 increase/
per share amounts) 2000 1999 (decrease)
Net revenue:
Products $ 9,961 $ 8,773
Services 1,712 1,462
-------- --------
Total 11,673 10,235 14
Costs and expenses:
Cost of products
sold and services 8,349 7,068
Research and development 607 576
Selling, general and
administrative 1,765 1,494
-------- --------
Total 10,721 9,138 17
Earnings from operations 952 1,097 (13)
Interest income and other, net 163 149
Interest expense 56 47
-------- --------
Earnings from continuing
operations before taxes 1,059 1,199 (12)
Provision for taxes 265 317
-------- --------
Net earnings from continuing
operations 794 882 (10)
-------- --------
Net earnings from discontinued
operations -- 78
-------- --------
Net earnings $ 794 $ 960 (17)
======== ========
Basic net earnings per share:(A)
Continuing operations $ 0.80 $ 0.87
Discontinued operations -- 0.08
-------- --------
$ 0.80 $ 0.95 (16)
======== ========
Diluted net earnings per share:(A)
Continuing operations $ 0.77 $ 0.85
Discontinued operations -- 0.07
-------- --------
$ 0.77 $ 0.92 (16)
======== ========
Cash dividends per share $ 0.16 $ 0.16
======== ========
Average shares used in computing
basic net earnings per share 999 1,011
======== ========
Average shares and equivalents
used in computing diluted net
earnings per share 1,043 1,049
======== ========
(A) The calculation of diluted earnings per share includes the
effect of common-stock equivalents, such as stock options, while the
calculation of basic earnings per share does not.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In millions)
(unaudited)
Jan. 31 Oct. 31
2000 1999
ASSETS
Current assets:
Cash and cash equivalents $ 2,985 $ 5,411
Short-term investments 255 179
Accounts receivable 5,435 5,958
Financing receivables 1,839 1,889
Inventory 5,100 4,863
Other current assets 3,717 3,342
-------- --------
Total current assets 19,331 21,642
-------- --------
Property, plant and equipment, net 4,336 4,333
Long-term investments and other assets 5,983 5,789
Net assets of discontinued operations 4,261 3,533
-------- --------
$ 33,911 $ 35,297
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 515 $ 3,105
Accounts payable 3,850 3,517
Employee compensation and benefits 1,210 1,287
Taxes on earnings 2,092 2,152
Deferred revenues 1,534 1,437
Other accrued liabilities 3,089 2,823
-------- --------
Total current liabilities 12,290 14,321
-------- --------
Long-term debt 1,535 1,764
Other liabilities 780 917
Stockholders' equity 19,306 18,295
-------- --------
$ 33,911 $ 35,297
======== ========
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
Net revenue (which includes intersegment revenue), earnings from
operations and assets for each segment are provided in the table
below:
Three months ended Percent
(In millions) January 31 increase/
2000 1999 (decrease)
Net revenue:
Imaging and Printing Systems $ 5,140 $ 4,538 13
Computing Systems 5,132 4,470 15
IT Services 1,619 1,418 14
-------- --------
Total Segments 11,891 10,426
-------- --------
Eliminations / Other (218) (191)
Total HP Consolidated $ 11,673 $ 10,235 14
======== ========
Earnings from operations:
Imaging and Printing Systems $ 677 $ 643 5
Computing Systems 177 243 (27)
IT Services 183 227 (19)
-------- --------
Total Segments 1,037 1,113
-------- --------
Eliminations / Other (85) (16)
Total HP Consolidated $ 952 $ 1,097 (13)
======== ========
Assets:
Imaging and Printing Systems $ 6,914 $ 7,304 (5)
Computing Systems 6,217 6,049 3
IT Services 7,045 6,976 1
-------- --------
Total Segments $ 20,176 $ 20,329
-------- --------
Corporate / Other 9,474 11,435
Total assets from continuing
operations $ 29,650 $ 31,764
-------- --------
Net assets of discontinued
operations $ 4,261 $ 3,533
-------- --------
Total HP Consolidated $ 33,911 $ 35,297 (4)
======== ========
--------------------------------------------------------------------------------
Contact:
Hewlett-Packard Company
Marlene Somsak, 650/857-6805
marlene_somsak@hp.com
or
Jennifer Ruddock, 650/857-2110
jennifer_ruddock@hp.com
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