HP Reports Second Quarter 2009 Results

PALO ALTO, Calif. — (BUSINESS WIRE) — May 19, 2009 HP (NYSE: HPQ) today announced financial results for its second fiscal quarter ended April 30, 2009, with net revenue of $27.4 billion, down 3% from a year earlier and up 3% when adjusted for the effects of currency.

 

In the second quarter, GAAP operating profit was $2.3 billion and GAAP diluted earnings per share (EPS) was $0.70, down from $0.80 in the prior-year period. Non-GAAP operating profit was $2.8 billion, with non-GAAP diluted EPS of $0.86, down from $0.87 in the prior-year period. Non-GAAP financial information excludes $382 million of adjustments on an after-tax basis, or $0.16 per diluted share, related primarily to amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

“Disciplined focus on operational efficiencies and execution drove record cash flow,” said Mark Hurd, HP chairman and chief executive officer. “Our services business continued to deliver strong profitability with an increased deal pipeline and the EDS integration tracking ahead of schedule.”

      Q2 FY09   Q2 FY08   Y/Y
  Net revenue ($B)   $ 27.4   $ 28.3   -3%
  GAAP operating margin     8.4%     9.2%   (0.8 pts)
  GAAP net earnings ($B)   $ 1.7   $ 2.1   -17%
  GAAP diluted EPS   $ 0.70   $ 0.80   -13%
  Non-GAAP operating margin     10.4%     10.0%   0.4 pts
  Non-GAAP net earnings ($B)   $ 2.1   $ 2.2   -6%
  Non-GAAP diluted EPS   $ 0.86   $ 0.87   -1%

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.

Revenue grew 9% in the Americas to $12.1 billion. Revenue declined 11% in Europe, the Middle East and Africa and 10% in Asia Pacific to $10.6 billion and $4.7 billion, respectively. When adjusted for the effects of currency, revenue grew 12% in the Americas while declining 2% in Europe, the Middle East and Africa and 5% in Asia Pacific. Revenue from outside of the United States in the second quarter accounted for 64% of total revenue, with revenue in the BRIC countries (Brazil, Russia, India and China) declining 12% over the prior-year period while accounting for 9% of total HP revenue.

Services

Services revenue increased 99% to $8.5 billion due primarily to the EDS acquisition. Infrastructure Technology Outsourcing posted revenue of $3.8 billion while Technology Services, Application Services and Business Process Outsourcing posted revenue of $2.4 billion, $1.5 billion and $709 million, respectively. Operating profit was $1.2 billion, or 13.8% of revenue, up from $507 million, or 11.9% of revenue, in the prior-year period. The EDS integration is tracking ahead of plan.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported total revenue of $3.5 billion, down 28%. Storage revenue declined 22% with the midrange EVA product line down 21%. Industry Standard Server revenue and Business Critical Systems revenue declined 29% each, while ESS blade revenue was down 12%. Operating profit was $250 million, or 7.2% of revenue, down from $655 million, or 13.7% of revenue, in the prior-year period.

HP Software

HP Software revenue declined 15% to $880 million. Business Technology Optimization and Other Software revenue declined 15% each. Operating profit was $157 million, or 17.8% of revenue, up from $104 million, or 10.0% of revenue, in the prior-year period.

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