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Hewlett Packard Pre-releases Following Memo Leak, Outlook Worse Than Expected, Japan Earthquake Blamed

Tyler Durden's picture




 

Following the report of the leaked HP memo which indicated much more weakness in the current quarter than expected, the firm was forced to scramble and released earning early, with the full number coming out at 7:30 EDT. And neither the market, nor John Paulson who recently bought a $1 billion stake in the company, is happy with the disclosure. While the company beats on current quarter top line and EPS, ($31.63 billion vs $31.55 billion exp. revenue, $1.24 EPS vs $1.21 EPS expectation), it was all about the outlook. The firm said it is "revising full year GAAP diluted earnings per share outlook down to at least $4.27 and non-GAAP diluted earnings per share outlook down to at least $5.00." This is a problem as previously it had seen the full year EPS range at $5.25-$5.28, and the outlook was $5.24. It also said that for Q3 "HP estimates revenue of approximately $31.1 billion to $31.3 billion, GAAP diluted EPS of approximately $0.90, and non-GAAP diluted EPS of approximately $1.08." For the full year HP now expects revenue in the range of $129 billion to $130 billion. Previously this was $130-$131.5 billion. And for all those scratching their heads how long before the Japan get out of jail free card is used, here it is: "HP’s revised outlook for the third quarter and the full year fiscal 2011 reflects an expected near-term impact from the Japan earthquake and related events, continued softness in sales of consumer PCs, and reduced operating profit expectations for Services."

More from the Press Release:

HP (NYSE:HPQ - News) today announced financial results for its second fiscal
quarter ended April 30, 2011. Net revenue of $31.6 billion was up 3%
from the prior-year period as reported and up 1% when adjusted for the
effects of currency.

GAAP diluted earnings per share (EPS) was $1.05, up 15% from $0.91 in
the prior-year period. Non-GAAP diluted EPS was $1.24, up 14% from $1.09
in the prior-year period. Non-GAAP financial information excludes
after-tax costs of approximately $0.19 per share and $0.18 per share in
the second quarter of fiscal 2011 and 2010, respectively, related
primarily to the amortization of purchased intangibles, restructuring
charges and acquisition-related charges. Information about HP’s use of
non-GAAP financial information is provided under “Use of non-GAAP
financial information” below.

“HP executed well and delivered a solid quarter,” said Léo
Apotheker
, HP president and chief executive officer. “Our enterprise
strategy, with services at its core, is focused on higher value-added
solutions. Today we are accelerating our efforts to align our services
business model to our long-term strategy to deliver unprecedented value
to our customers and a better return for our shareholders.”

           
  Q2 FY11   Q2 FY10   Y/Y
Net revenue ($B) $31.6
$30.8
3%
GAAP operating margin 9.4% 9.3% 0.1 pts
GAAP net earnings ($B) $2.3
$2.2
5%
GAAP diluted EPS $1.05
$0.91
15%
Non-GAAP operating margin 11.3% 11.2% 0.1 pts
Non-GAAP net earnings ($B) $2.7
$2.6
3%
Non-GAAP diluted EPS $1.24  
$1.09
  14%
 

“In the second quarter, we saw continued strength in the enterprise with
combined revenue from our commercial businesses up 8% year over year,”
said Cathie
Lesjak
, HP executive vice president and chief financial officer. “We
again expanded our margins and increased both earnings per share and
cash flow from operations double digits year over year.”

Trends and regional performance

Results were largely driven by performance in the commercial sector as
businesses continued to spend on technology. HP experienced uneven
consumer performance across its product categories during the quarter
with continued softness in consumer PCs across all geographies.

Second quarter revenue was up 2% year over year in the Americas to $13.8
billion. Revenue was down 1% in Europe, the Middle East and Africa and
up 10% in Asia Pacific to $11.7 billion and $6.1 billion, respectively.
When adjusted for the effects of currency, revenue was up 1% in the
Americas, flat in Europe, the Middle East and Africa and up 4% in Asia
Pacific. Revenue from outside of the United States in the second quarter
accounted for 66% of total HP revenue. HP saw accelerated growth in BRIC
countries (Brazil, Russia, India and China) with revenue increasing 19%
while accounting for 12% of total HP revenue.

Business group highlights

  • Personal Systems Group (PSG) revenue declined 5% year over year
    with a 5.7% operating margin. PSG remains the PC market leader in
    terms of units, revenue and profit share. PSG maintained its market
    leadership position in Commercial PCs, with Commercial Client revenue
    growth of 13% outpacing Consumer Client revenue decline of 23% in the
    quarter.
  • Imaging and Printing Group (IPG) revenue grew 5% year over year
    with a 17.0% operating margin. IPG continued to deliver strong
    performance across the business with share gains in all printing
    categories and 41% year-over-year growth in commercial printer
    hardware units. IPG continued to drive innovation and momentum with
    the new ePrint platform, graphic arts and other commercial print
    solutions.
  • Services revenue grew 2% year over year with a 15.2% operating
    margin. To improve long-term performance, HP is accelerating alignment
    of the services business with the company’s overall strategy,
    including making investments to drive more value-added solutions and
    migration to the cloud.
  • Enterprise Servers, Storage and Networking (ESSN) revenue
    grew 15% year over year with a 13.8% operating margin. ESSN delivered
    a solid quarter with HP’s innovative converged infrastructure products
    winning in the data center. HP gained momentum in cloud with strong
    interest in and the successful launch of HP CloudSystem.
  • HP Software revenue grew 17% year over year with a 20.2%
    operating margin. HP Software revenue was driven by strong growth in
    licenses and services of 29% and 22%, respectively.
  • HP Financial Services revenue grew 17% year over year with
    a 9.4% operating margin. Financial Services continued to see its
    strong performance driven by both double-digit growth in lease volume
    and a healthy improvement in portfolio assets.

Asset management

HP generated $4.0 billion in cash flow from operations in the second
quarter. Inventory ended the quarter at $6.8 billion, with days of
inventory up 1 day year over year at 26 days. Accounts receivable of
$18.6 billion was up 10 days year over year at 53 days. Accounts payable
ended the quarter at $14.2 billion, up 3 days from the prior-year
period. HP’s dividend payment in the second quarter resulted in cash
usage of $182 million. HP also utilized $2.7 billion of cash during the
quarter to repurchase approximately 64 million shares of common stock in
the open market. HP exited the quarter with $12.8 billion in gross cash.

Outlook

HP’s revised outlook for the third quarter and the full year fiscal 2011
reflects an expected near-term impact from the Japan earthquake and
related events, continued softness in sales of consumer PCs, and reduced
operating profit expectations for Services.

For the third quarter of fiscal 2011, HP estimates revenue of
approximately $31.1 billion to $31.3 billion, GAAP diluted EPS of
approximately $0.90, and non-GAAP diluted EPS of approximately $1.08.

Third quarter fiscal 2011 non-GAAP diluted EPS estimates exclude
after-tax costs of approximately $0.18 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 of $129 billion to
$130 billion, GAAP diluted EPS of at least $4.27, and non-GAAP diluted
EPS of at least $5.00.

Full year fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax
costs of approximately $0.73 per share, related primarily to the
amortization of purchased intangibles, restructuring charges and
acquisition-related charges.

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 Q2 FY11 earnings conference call is accessible via an audio webcast
at www.hp.com/investor/2011q2webcast.

 

 

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Tue, 05/17/2011 - 07:43 | 1282313 ivana
ivana's picture

Japan?

Not Eastern?

Tue, 05/17/2011 - 08:03 | 1282352 writingsonthewall
writingsonthewall's picture

I hear HP are blaming "tight consumers" - I mean really, how outrageous - consumers being savvy in a time of austerity?

 

What do they think they're playing at? - they shoudl stand up, borrow from wherever they can and buy the shit that HP produces right now....whether they need it or not.

What is the consumer playing at?

Soon we'll have to do it for them - take their taxes and buy some HP equipment. It is patriotic after all.

That's right folks - corp-america demands you spend every last penny on shit you don't need. Food, housing, essentials - forget them - just buy electronic crap because it's cheap.

Tue, 05/17/2011 - 08:23 | 1282385 oh_bama
oh_bama's picture

No IT ALL BECAUSE OF THE WEATHER IN THE SOUTH!!

Tue, 05/17/2011 - 07:54 | 1282321 Oh regional Indian
Oh regional Indian's picture

About time. Wholet Packard is another strange beast. Un-innovative, un-exciting....
Carly's run for California Gov. was sign enough for what really drives the company.
Fail! Thud thud...
No mis-prints. Job losses in the Valley coming. All commodity manufacturers are going to face a similar future, sooner or later as JIT collapse hit's globally.

ORI

http://aadivaahan.wordpress.com/2010/11/18/enchanted-mesmerized-en-chained/

Tue, 05/17/2011 - 10:14 | 1282768 slewie the pi-rat
slewie the pi-rat's picture

hi ORI.  your daily website ad, here, has fiorina running for gov.  she ran for the senate seat, won (bought) the repub.  nonination, and lost to babs boxer.  meg whitman threw her ebay money @ the state house and lost to jerry brown.

both republican women had to apologiZe for their voting records.  going to the polls or filling out that absentee ballot---didn't make it into the multi-tasking/networking daisy-chain of dedication to personal/corporate power and wealth.  i'm pretty sure they both voted last year, tho, ORI.  trust me. 

here we have fuk_u offered as part of the earnings headwind for HP.  now, i think HP will focus, in a business-like manner, on what it does best:  watch poeple buy stuff in the apple stores.

Tue, 05/17/2011 - 07:57 | 1282327 Maiden Lane
Maiden Lane's picture

It must be because of the snow

Tue, 05/17/2011 - 08:02 | 1282339 jus_lite_reading
jus_lite_reading's picture

Japan's earthquake is the new unusual weather. And Easter is the new daylight savings time.

Fuck these frauds!!! AND I MEAN THAT SINCERELY. Privatized profits, socialized losses. Soon HP will be asking for a bailout.

Tue, 05/17/2011 - 08:08 | 1282357 writingsonthewall
writingsonthewall's picture

I say FUCK GOLDMAN too - I don't know how...but they're behind this somewhere. They always are the pig fucking blankenfien wrinkly faced turd bags.

Tue, 05/17/2011 - 08:07 | 1282362 pepperspray
pepperspray's picture

The financial guy on the radio said earnings season was over

Tue, 05/17/2011 - 08:21 | 1282367 pepperspray
pepperspray's picture

.

Tue, 05/17/2011 - 08:30 | 1282394 Kyron95131
Kyron95131's picture

i figured it was because of the snow on the east coast of the US again

Tue, 05/17/2011 - 09:05 | 1282507 Stuck on Zero
Stuck on Zero's picture

Anyone who has purchased an HP product in the last two or three years will tell you why revenues are not looking good.  Their quality has gone to hell.  Their printers fail, they dhhave defraued everyone on their cartridges, and their software is the worst in the world.  They are facing several class action lawsuits over product quality.  Once the shining beacon of quality they are now the standard of crap.

Tue, 05/17/2011 - 11:05 | 1283003 tomme12
tomme12's picture

Most of their enterprise customers are complaining about their shitty offshore support they provide for outsourcing IT helpdesk.  They are requesting to bring it back onshore to provide better quality support and response times.  There spending the house on trying to take out Cisco products.  The routing and switching market was thought to be "heating up" between these two when Cisco and HP divorced each other last year.   Well, some of HPs sales has increased, but in the same token, so has Cisco's on their server market.  Everyone is having a hard time selling HP switches unless the customer likes to shop at TJ Max and is ok with the a pocket sewn to the crotch every now and then.

HP has completely tore up the EDS side of the house with mismanagement from head to toe.  They are trying to shove legacy long time Cisco customers with HP gear that does not make sense to them.

I may hump Cisco's leg, (alot), and the guy who wears the pants may need to be replaced, but the people and product are top notch.  

Tue, 05/17/2011 - 12:06 | 1283306 Jack Sheet
Jack Sheet's picture

Imaging and Printing Group (IPG) revenue grew 5% year over year with a 17.0% operating margin.

Too frigging right with the usurious prices they charge for ink cartridges. Frigging license to print money (for them)

Fri, 07/22/2011 - 03:08 | 1479772 jimmight
jimmight's picture

Finding and shorting Chinese frauds is turning into a nice little cottage industry. Soon everybody is going to be looking for their own.
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