HP IMAGING REVENUE OF $6.8 BILLION FOR Q4

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HP Releases Q4 Results – Stock Price Rises
HP 4th Quarter Beats Earnings Estimates; Company Announces Additional Job Cuts and Special Charges Reduce Earnings to $416 Million, Down from $1.1 Billion in 2004.
• Imaging and Printing HP’s strongest business segment, reporting revenue of $6.8 billion, up 4 percent over the same period in 2004
• Net revenue of $22.9 billion, up 7% year-over-year
• Non-GAAP operating profit of $1.7 billion, $0.51 earnings per share
• GAAP operating profit of $232 million, $0.14 earnings per share
• Cash flow from operations of $1.9 billion

PALO ALTO, CA, Nov. 2005 – HP : today reported financial results for its fourth fiscal quarter ended Oct. 31, 2005, showing net revenue increased 7% year-over-year to $22.9 billion. Non-GAAP(1) operating profit was $1.7 billion, with non-GAAP diluted earnings per share (EPS) of $0.51, up from $0.41 in the prior-year period.
Non-GAAP financial information for the fourth quarter excludes $1.1 billion of adjustments(1) on an after-tax basis, or $0.37 per diluted share, related primarily to restructuring-related costs and amortization of purchased intangibles, offset by a pension curtailment credit. GAAP operating profit was $232 million and GAAP diluted EPS was $0.14 per share, down from $0.37 in the prior-year period.
Strong, Balanced Quarter
“HP delivered another strong quarterly performance, with balanced revenue growth, good cost discipline, improved margins in key businesses and strong cash flow,” said Mark Hurd, HP chief executive officer and president. “We are pleased with our progress to date, but there is more work ahead of us.”
During the quarter, on a year-over-year basis, revenue in the Americas grew 5% to $10.0 billion, Europe, the Middle East and Africa grew 8% to $9.1 billion, and Asia Pacific grew 12% to $3.8 billion. On a consolidated basis, when adjusted for the effects of currency, fourth quarter revenue grew 6% year-over-year.
Personal Systems Group
Personal Systems Group (PSG) revenue grew 9% year-over-year to $7.1 billion, with unit shipments up 13%. On a year-over-year basis, desktop revenue increased 1% and notebook revenue grew 23%. Revenue for commercial clients, which includes workstations, grew 8% over the prior-year period, while revenue in consumer clients grew 14%. PSG reported an operating profit of $200 million, or 2.8% of revenue, up from a profit of $77 million, or 1.2% of revenue, in the prior-year period.
Imaging and Printing Group
Imaging and Printing Group (IPG) posted quarterly revenue of $6.8 billion, up 4% year-over-year. On a year-over-year basis, consumer hardware revenue decreased 4%, with printer unit shipments up 6%. Commercial hardware revenue grew 4% over the prior-year period, with printer unit shipments up 16%. Color laser unit shipments increased 41% year-over-year, and enterprise multifunction printer shipments increased 83%, reflecting continued momentum in key growth initiatives. Supplies revenue grew 7%. Operating profit was $896 million, or 13.2% of revenue, down from a profit of $1.1 billion, or 16.6% of revenue, in the prior-year period.
Enterprise Storage and Servers
Enterprise Storage and Servers (ESS) reported revenue of $4.5 billion, up 10% over the prior-year period. On a year-over-year basis, industry-standard server revenue increased 12%, networked storage revenue grew 17% and business-critical systems revenue declined 1%. ESS reported an operating profit of $405 million, or 9.1% of revenue, up from a profit of $100 million, or 2.5% of revenue, in the prior-year period. HP Services
HP Services (HPS) revenue grew 6% year-over-year to $3.9 billion. On a year-over-year basis, Managed Services revenue grew 9%, Technology Services grew 4% and Consulting and Integration grew 11%. Operating profit was $322 million, or 8.3% of revenue, down from a profit of $375 million, or 10.2% of revenue, in the prior-year period.
Software
Software reported quarterly revenue of $311 million, an increase of 11% year-over-year, with revenue in HP OpenView and HP OpenCall increasing 16% and 3%, respectively. Software reported an operating profit of $27 million, or 8.7% of revenue, compared with a loss of $7 million in the prior-year period.
Financial Services
HP Financial Services (HPFS) reported revenue of $514 million, an increase of 3% year-over-year. Finance volume and net portfolio assets declined 1% and 3% respectively. Operating profit was $52 million, or 10.1% of revenue, up from a profit of $19 million, or 3.8% of revenue, in the prior-year period.
Asset Management
Inventory ended the quarter at $6.9 billion, up $233 million sequentially and down $194 million year-over-year. Accounts receivable increased $1.1 billion sequentially and decreased $323 million over the prior-year period to $9.9 billion. HP’s dividend payment of $0.08 per share in the fourth quarter resulted in cash usage of $229 million. In addition, HP utilized $1.4 billion of cash during the fourth quarter to repurchase stock. HP exited the quarter with $13.9 billion in gross cash, which includes cash and cash equivalents of $13.9 billion and short- and certain long-term investments of $36 million.
Outlook
First quarter FY06 non-GAAP earnings per share is expected to be in the range of $0.46 to $0.48, excluding $0.03 to $0.04 of stock-based compensation expense, or $0.42 to $0.44 including stock-based compensation expense.
Full year FY06 non-GAAP earnings per share is expected to be in the range of $1.88 to $1.95, excluding approximately $0.13 of stock-based compensation expense, or $1.75 to $1.82 including stock-based compensation expense.
Non-GAAP earnings per share estimates for Q1 FY06 and full year FY06 exclude after-tax costs of approximately $0.04 per share and $0.14 per share respectively, primarily related to the amortization of purchased intangible assets.

HP to post stronger quarter
NOVEMBER  2005
COST cuts and steady growth in its printer, server and personal computer businesses will drive a rise in Hewlett-Packard quarterly profit when the company reports on Thursday, analysts said.
With results improving, the No.2 computer is likely to abandon any thoughts of writing down billions of dollars of goodwill, an accounting move that would admit the failure of the 2002 acquisition of Compaq but also give new chief executive Mark Hurd a fresh start.
“HP is going to look much better coming out of this quarter than Dell and Lexmark,” said Brent Bracelin, an analyst at Pacific Crest Securities. Dell, the No.1 PC maker, and printer maker Lexmark both had disappointing quarters, he said.
US accounting rules require companies annually to test whether goodwill – an estimation of intangible assets such as the value of a brand name or high employee morale and undefined merger-related benefits – has been impaired.
Since shortly after Mr Hurd’s arrival on April 1, analysts and investors have speculated that HP might choose to write off the goodwill related to the Compaq deal
That would be a symbolic admission that the purchase did not yield the value that had been promised and mark a clear end to the era of previous CEO Carly Fiorina.
But HP has been steadily improving its results, and its long-struggling PC business had already started to turn the corner before Mr Hurd took the helm. HP last quarter posted results that topped analyst expectations and issued a forecast for the current quarter that was ahead of then-average Wall Street forecasts.
“When earnings are improving, a company is less likely to take a write-off,” said Cindy Shaw, an analyst at Moors & Cabot, adding that she had speculated HP might take the Compaq write-down when it last reported results in August.
If HP were to write down the Compaq goodwill, it could raise red flags for investors, who are looking for predictable and sustained revenue and profit growth from HP.
“If they do write it off, that might imply they are negative about future profitability,” Ms Shaw said. “To write it off would be contradictory.”
Analysts on average expect HP’s per-share profit before items in the fourth quarter to rise 12 per cent to US46c and revenue is forecast to rise 6.4 per cent to $US22.8 billion ($31.2 billion), according to Reuters Estimates.
In each of the first three quarters of its fiscal year 2005, HP has topped the average Wall Street per-share profit estimate. Revenue eclipsed the consensus estimate in two of the three quarters.

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November 21, 2005 at 10:29 AM