HP reports Q4 earnings; revenue up 8% to $33.5 billion

Hewlett-Packard reported a solid quarter Monday evening, as the consumer electronics giant posted earnings that beat analyst expectations. HP’s net revenue in its fiscal fourth quarter of 2010 came in at $33.3 billion, up $2.5 billion from the fourth quarter last year. Non-GAAP diluted EPS was also up year-over-year, jumping 17% to $1.33. HP raked in a total of $126 billion in net revenue for its full fiscal 2010, up an impressive 10% from 2009. Looking forward, the company now projects 2011 revenue to fall between $132 and $133.5 billion, with non-GAAP diluted EPS ranging from $5.16 to $5.26. Hit the jump for the full report.

HP Reports Fourth Quarter 2010 Results

•Fourth quarter net revenue of $33.3 billion, up $2.5 billion or 8% from a year earlier
•Fourth quarter non-GAAP operating profit up 10% to $4.0 billion led by gross margin improvement; GAAP operating profit up 5% to $3.3 billion
•Fiscal 2010 net revenue of $126 billion, up 10% or $11.5 billion, with non-GAAP diluted earnings per share up 19% and GAAP diluted earnings per share up 18% from the preceding year
•Broad-based year-over-year growth in the commercial segment driven by ESS growth of 25% and growth in commercial PC •Clients and Printers of 20% and 22%, respectively, in the fourth quarter
•Delivered 50% organic growth in HP Networking, with 3Com revenue ahead of plan
•Raising full-year earnings per share outlook

PALO ALTO, Calif., Nov 22, 2010 (BUSINESS WIRE) — HP (NYSE:HPQ) today announced financial results for its fourth fiscal quarter ended October 31, 2010, with net revenue of $33.3 billion, up 8% from the prior-year period including a slight negative currency impact of about one percentage point.

In the fourth quarter, GAAP diluted earnings per share (EPS) was $1.10, up 11% from $0.99 in the prior-year period. Non-GAAP diluted EPS was $1.33, up 17% from $1.14 in the prior-year period. Non-GAAP financial information excludes after-tax costs of approximately $0.23 per share and $0.15 per share in the fourth quarter of fiscal 2010 and 2009, respectively, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.

“HP proved once again that it is able to execute given its market strengths and technology leadership,” said Léo Apotheker, HP president and chief executive officer. “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.”

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.

Full Year Fiscal 2010

Net revenue for the full fiscal year 2010 was $126.0 billion, up 10% compared with the prior-year or up 8% when adjusted for the effects of currency. GAAP operating profit was $11.5 billion, and GAAP diluted EPS was $3.69, up from $3.14 in the prior year. Non-GAAP operating profit was $14.4 billion, and non-GAAP diluted EPS was $4.58, up from $3.85 in the prior-year. Non-GAAP financial information excludes $2.1 billion of adjustments on an after-tax basis, or $0.89 per diluted share, related to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

Fourth Quarter Fiscal 2010

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

Services

Services revenue increased 0.4% to $9.0 billion in the fourth quarter. Revenue in each of Infrastructure Technology Outsourcing, Application Services and Technology Services grew roughly 1%. Business Process Outsourcing revenue was down 11%, including a 7% negative impact due to the divestiture of ExcellerateHRO, LLP (EHRO). Operating profit was $1.5 billion, or 16.7% of revenue, up from $1.4 billion, or 16.2% 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%. Industry Standard Server revenue increased 32%, while Storage revenue increased 14% and Business Critical Systems revenue grew 10%. ESS blade revenue was up 51%. Operating profit was $730 million, or 13.9% of revenue, up from $481 million, or 11.4% of revenue, in the prior-year period.

HP Software

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

Personal Systems Group

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

Imaging and Printing Group

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

Corporate Investments

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

HP Financial Services

HP Financial Services (HPFS) revenue increased 11% to $809 million in the fourth quarter. Financing volume increased 11%, and net portfolio assets increased 14%. 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.

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