HWP in line with estimates.
Thursday February 15, 4:05 pm Eastern Time
Press Release
HP Reports First Quarter Results
PALO ALTO, Calif.--(BUSINESS WIRE)--Feb. 15, 2001--Hewlett-Packard Company (NYSE:HWP - news) today
reported financial results for its first fiscal quarter ended Jan. 31, 2001.
The company reported first quarter revenue of $11.9 billion, compared to $11.7 billion in last year's first quarter, an increase of
2% as reported and 7% before the effects of foreign currency.
Pro forma earnings per share (EPS) on a diluted basis, excluding certain items, was 37 cents, compared to pro forma EPS of
40 cents in the prior-year period.
Items excluded from pro forma earnings were:
$365 million, or 15 cents per share after tax, charge stemming from impairment of investments in emerging market
companies. This action was taken after careful consideration of the multi-year impact of current and expected market
conditions on HP's entire investment portfolio;
A $102 million, or 3 cents per share after tax, charge associated with the previously announced elimination of
approximately 1,700 marketing positions;
$44 million, or 2 cents per share, of in-process R&D costs associated with the Bluestone Software acquisition, costs
related to the proposed acquisition of PricewaterhouseCoopers management consultancy, and other acquisition-related
charges;
$26 million, or 1 cent per share, of amortization of goodwill and other intangibles.
Actual EPS on a diluted basis before a 1 cent extraordinary gain on extinguished debt was 16 cents per share on approximately
2 billion shares of common stock and equivalents outstanding. Diluted EPS for the same period last year was 38 cents.
``Clearly, this was a tough quarter and our results reflect that. Continued deterioration in the U.S. economy, and related
weakness in consumer and business IT spending, contributed to a sales slowdown in North America with revenues declining by
6% year over year. More specifically, difficult U.S. market conditions impacted our consumer and commercial desktop PC
business and our printer hardware business,'' said Carly Fiorina, chairman, president and chief executive officer.
``Revenues in all other regions grew 8%, 17% before currency effects. Europe posted growth of 7% as reported, 20% before
currency effects; Asia Pacific grew 10% as reported, 12% before currency effects; and Latin America increased by 14% as
reported.
``From an execution point of view, our performance in the commercial channel was disappointing. Performance issues were
related to insufficient demand generation funds and account conflicts, which we are addressing. This had a material impact on
the results for our PC server and UNIX server businesses,'' said Fiorina.
``On a positive note, we effectively managed expense growth to just 4% for the quarter. Our channel inventories are in good
condition. Our balance sheet remains strong. Our printing and imaging business remains very strong despite US hardware
declines. We're holding or gaining share in this business and supplies growth was 16%, with digital imaging up 21%. We also
saw significant progress in a number of our always-on infrastructure businesses. Large corporate accounts grew 26%, software
grew 21%, enterprise storage was up 20%, and IT consulting grew 56% year over year. And our consumer business as a
whole maintained or grew share in this challenging economic environment.
``Given ongoing economic uncertainty in the U.S., and the potential that this uncertainty may spread to other regions, especially
those dependent on exports to the U.S., we are maintaining our revenue guidance for the second fiscal quarter in the
low-to-mid single digits. We could see revenue growth improvement in the second half if the US economy improves as some
economists expect and current foreign exchange rates hold. However, visibility remains extremely limited and we are not
counting on a return to double-digit revenue growth this year. Despite short-term challenges, we believe the markets we
participate in offer strong growth opportunity going forward and we remain confident in our strategy.''
Business Segment Results
Imaging and Printing Systems
The imaging and printing systems segment includes laser and InkJet printers, imaging devices and associated supplies. Revenues
overall for the segment were essentially flat year over year (up 4% in local currency). Revenues in North America were down
4%, while international revenues were up 5%. While revenue growth slowed, HP continued to hold or gain share and supplies
growth continued to be strong. HP saw continued strong sales in the market overall for color LaserJets, supplies, scanners,
all-in-one (AIO) products, and consumer imaging devices.
Imaging revenues grew 21% over the year-ago period, with AIOs up 26% and scanners up 8%. Supplies revenues grew 16%,
resulting from an expanding installed base and an increase in sales of color LaserJet supplies.
Operating margin was 12.8%, compared to 13.6% for the same period last year and 12.6% for last quarter.
Computing Systems
The computing systems segment includes a broad range of Internet infrastructure systems and solutions for businesses and
professionals, including workstations, desktops, notebooks, mobile devices, UNIX® and PC servers, storage and software
solutions. Overall revenues for the segment rose 2% year over year (8% in local currency).
UNIX server revenues rose 6% year over year, with strong growth in enterprise accounts offset by declines in channel-driven
revenue. Volume shipments of Superdome, HP's high-end UNIX system, commenced on schedule in January. The sales funnel
is strong, although the sales cycle is longer than expected. PC server and commercial desktop PC revenues were both down
11%. Home PC revenues were flat, notebooks were up 54% and technical workstations were up 6% for the quarter.
Enterprise storage revenues were up 20%, with continued strength from HP's core HP Surestore Disk Array XP512 storage
offering as well as leading-edge storage area network solutions. The overall XP storage business grew 50% this quarter.
Software revenues were up 21%, with HP OpenView service management software revenues up 38%.
Operating margin in this business was a negative 0.4%, compared to 3.9% for the same period last year and 4.0% for the last
quarter. This was due primarily to losses in the PC server and PC client businesses.
IT Services
The IT services segment includes mission-critical, outsourcing, consulting and customer financing services. Revenues overall for
the segment grew 13% year over year (21% in local currency). HP's consulting business achieved 56% revenue growth, with
professional utilization at all-time highs and significant backlog as HP customers increased their demand for integrated solutions.
Outsourcing revenues were up 12% worldwide, while support grew at 5%.
Operating margin was 5.3%, compared to 7.5% for the same period last year and 4.5% for the last quarter.
Costs and Expenses
Cost of goods sold this quarter was 72.8% of net revenue, up from 71.5% in the year-ago period. Operating expenses grew
4% on a pro forma basis, and were 20.4% of net revenue. This compares to 20.0% on a pro forma basis for the same period
last year.
HP expects its pro forma tax rate for FY2001 to be approximately 22%.
Asset Management
Return on assets on a pro forma basis for the quarter was 10.7%, compared to 10.6% for the same period last year. Inventory
was 12.4% of revenue compared to 11.6% in last year's first fiscal quarter. Trade receivables were 12.2% of revenue
compared to 12.4% in the prior-year period. Net property, plant and equipment was 9.3% of revenue compared to 9.9% in
the year-ago quarter.
About HP
Hewlett-Packard Company -- a leading global provider of computing and imaging solutions and services -- is focused on
making technology and its benefits accessible to individuals and businesses through simple appliances, useful e-services and an
Internet infrastructure that's always on.
HP had total revenue from continuing operations of $48.8 billion in its 2000 fiscal year. Information about HP and its products
can be found on the World Wide Web at hp.com. |
