HP Q4 Earnings Down 88 Percent
HP announced financial results for its fourth quarter and full fiscal year ended Oct. 31, 2011.
"HP has a great opportunity to build on our strong hardware, software and services franchises with leading market positions, customer relationships and intellectual property," said Meg Whitman, HP president and chief executive officer. "We need to get back to the business fundamentals in fiscal 2012, including making prudent investments in the business and driving more consistent execution."
"While FY11 proved to be a challenging year, we grew non-GAAP EPS 7 percent and generated $12.6 billion in cash flow from operations," said Cathie Lesjak, HP executive vice president and chief financial officer. "We're remaining cautious heading into FY12, but are focused on delivering our earnings outlook and driving shareholder value."
Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below. Unless otherwise specified, all revenue amounts below are calculated on a GAAP basis.
Full year fiscal 2011 GAAP net revenue for the full fiscal year 2011 was $127.2 billion, up 1 percent compared with the prior year or down 1 percent when adjusted for the effects of currency. GAAP operating profit was $9.7 billion, and GAAP diluted earnings per share (EPS) was $3.32, down 10 percent from the prior year.
Non-GAAP net revenue for the full fiscal year 2011 was $127.4 billion, up 1 percent compared with the prior year or down 1 percent when adjusted for the effects of currency. Non-GAAP operating profit was $13.8 billion, and non-GAAP diluted EPS was $4.88, up 7 percent from the prior year.
Fiscal 2011 non-GAAP net revenue includes an additional $0.2 billion of revenue resulting from the exclusion of contra revenue associated with sales incentive programs implemented in the fourth quarter in connection with the wind down of HP's webOS device business, net of fourth quarter webOS device revenue. Non-GAAP earnings and operating profit information excludes after-tax costs of $3.3 billion, or $1.56 per diluted share, related to the wind down of HP's webOS device business, impairment of goodwill and purchased intangible assets, amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
Fourth Fiscal Quarter 2011
For the quarter, GAAP net revenue of $32.1 billion was down 3 percent from the prior-year period. Non-GAAP net revenue of $32.3 billion was down 3 percent from the prior-year period as reported and down 6 percent when adjusted for the effects of currency.
GAAP diluted EPS was $0.12, down 89 percent from the prior-year period. Non-GAAP diluted EPS was $1.17, down 12 percent from the prior-year period.
Fourth quarter non-GAAP net revenue includes an additional $0.2 billion of revenue resulting from the exclusion of contra revenue associated with sales incentive programs implemented in connection with the wind down of HP's webOS device business, net of webOS device revenue for the period. Fourth quarter non-GAAP earnings information excludes after-tax costs of $2.1 billion, or $1.05 per diluted share, related to the wind down of HP's webOS device business, impairment of goodwill and purchased intangible assets, amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
Fourth Fiscal Quarter 2011 Trends and Regional Performance
In the Americas, fourth quarter GAAP net revenue was $14.5 billion, down 4 percent year over year and down 5 percent when adjusted for the effects of currency. Non-GAAP net revenue in the Americas was $14.6 billion, down 3 percent year over year and down 4 percent when adjusted for the effects of currency.
Europe, the Middle East and Africa GAAP revenue of $11.7 billion was down 6 percent year over year and down 10 percent when adjusted for the effects of currency. GAAP revenue in Asia Pacific was $6 billion, representing a 3 percent increase year over year, and down 4 percent when adjusted for the effects of currency.
GAAP revenue from outside of the United States in the fourth quarter accounted for 65 percent of total HP revenue. BRIC countries (Brazil, Russia, India and China) generated revenue of $3.8 billion, up 9 percent over the year-ago period, for 12 percent of total HP revenue.
Revenue in HP's commercial businesses declined 2 percent year over year. Revenue in HP's consumer businesses, within PSG and IPG, was collectively down 9 percent year over year.
Fourth Fiscal Quarter 2011 Business Group Results
Services revenue of $9.3 billion grew 2 percent year over year with a 12.8 percent operating margin. Technology Services and Application Services revenue grew 3 percent and 2 percent, respectively, while IT Outsourcing revenue grew 1 percent and Business Process Outsourcing revenue declined 2 percent.
Enterprise Servers, Storage and Networking (ESSN) revenue declined 4 percent year over year with a 13 percent operating margin. Networking revenue was up 5 percent, Industry Standard Servers revenue was down 4 percent, Business Critical Systems revenue was down 23 percent and Storage revenue was up 4 percent.
HP Software revenue grew 28 percent year over year with a 27.7 percent operating margin. HP Software revenue was driven by revenue growth in licenses and services of 33 percent and 36 percent, respectively.
Personal Systems Group (PSG) revenue declined 2 percent year over year with a 5.7 percent operating margin. Commercial client revenue grew 5 percent, and Consumer client revenue declined 9 percent. Total units were up 2 percent with 5 percent growth in desktop units and 1 percent growth in notebook units.
Imaging and Printing Group (IPG) revenue declined 10 percent year over year with a 12.8 percent operating margin. Commercial revenue was up 4 percent year over year with commercial printer hardware units up 5 percent. Consumer printer hardware revenue was down 8 percent year over year with an 8 percent decline in units.
Financial Services revenue grew 18 percent year over year driven by double-digit growth in both lease volume and portfolio assets. The business delivered a 10.3 percent operating margin.
Asset management HP generated $2.4 billion in cash flow from operations in the fourth quarter. Inventory ended the quarter at $7.5 billion, with days of inventory up 4 days year over year to 27 days. Accounts receivable of $18.2 billion was up 1 day year over year to 51 days. Accounts payable ended the quarter at $14.8 billion, flat from the prior-year period at 52 days. HP's dividend payment of $0.12 per share in the fourth quarter resulted in cash usage of $239 million. HP also utilized $500 million of cash during the quarter to repurchase approximately 17 million shares of common stock in the open market. HP exited the quarter with $8.1 billion in gross cash.
Outlook for the First Quarter of Fiscal 2012
HP estimates non-GAAP diluted EPS in the range of $0.83 to $0.86, and GAAP diluted EPS in the range of $0.61 to $0.64.
First quarter fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.22 per share, related primarily to the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.
HP expects full year fiscal 2012 non-GAAP diluted EPS of at least $4 and GAAP diluted EPS of approximately $3.20.
Full year fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.80 per share, related primarily to the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.
In order to more effectively manage HP as one company and align its guidance policy with its long-term objective of delivering profitable growth, HP only will be providing a quarterly and annual earnings per share outlook. The company believes that earnings per share is a better indicator of successful execution across its various business levers. HP remains committed to high levels of disclosure and transparency, including general commentary on its expectations relating to future revenue and business segment performance, and will continue to provide detailed segment-level financial performance data for completed fiscal periods.
More information on HP's quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations website at www.hp.com/investor/home.
HP's Q4 FY11 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2011q4webcast.
- People:
- Cathie Lesjak
- Meg Whitman