-- Fourth quarter net revenue up 15%, or $3.7 billion, from a
year earlier to $28.3 billion
-- Fiscal 2007 net revenue up 14%, or $12.6 billion, to $104.3
billion
-- Fourth quarter GAAP operating profit up 38% to $2.6 billion;
$0.81 earnings per share, up from $0.60 a year earlier
-- Fourth quarter non-GAAP operating profit up 27% to $2.8
billion; $0.86 earnings per share, up from $0.68 a year
earlier
-- HP Board of Directors approves $8 billion in share repurchase
authorization
PALO ALTO, Calif.--(BUSINESS WIRE)--Nov. 19, 2007--HP (NYSE:HPQ)
today announced financial results for its fourth fiscal quarter ended
Oct. 31, 2007, with net revenue of $28.3 billion, up 15% from a year
earlier and up 11% when adjusted for the effects of currency.
In the fourth quarter, GAAP operating profit was $2.6 billion and
GAAP diluted earnings per share (EPS) was $0.81, up from $0.60 in the
prior-year period. Non-GAAP operating profit was $2.8 billion, with
non-GAAP diluted EPS of $0.86 up from $0.68 in the prior-year period.
Non-GAAP financial information excludes $132 million of adjustments on
an after-tax basis, or $0.05 per diluted share, related primarily to
amortization of purchased intangibles. GAAP and non-GAAP financial
information include all stock-based compensation expense in both
current and prior-year periods.
"Strong performance across our businesses was highlighted by sharp
improvement in our software segment," said Mark Hurd, HP chairman and
chief executive officer. "We have added over $12 billion of new
revenue this year. While we still have more work to do, HP is well
positioned to make further progress in the marketplace."
------ ------ ------- ------- -------- -------
Q4 Q4
FY07 FY06 Y/Y FY07 FY06 Y/Y
---------------------- ------ ------ ------- ------- -------- -------
Net revenue ($B) $28.3 $24.6 15% $104.3 $ 91.7 14%
---------------------- ------ ------ ------- ------- -------- -------
GAAP operating margin 9.3% 7.7% 1.6 pts 8.4% 7.2% 1.2 pts
---------------------- ------ ------ ------- ------- -------- -------
GAAP net earnings ($B) $ 2.2 $ 1.7 28% $ 7.3 $ 6.2 17%
---------------------- ------ ------ ------- ------- -------- -------
GAAP diluted EPS $0.81 $0.60 35% $ 2.68 $ 2.18 23%
---------------------- ------ ------ ------- ------- -------- -------
Non-GAAP operating
margin 9.9% 9.0% 0.9 pts 9.2% 8.0% 1.2 pts
---------------------- ------ ------ ------- ------- -------- -------
Non-GAAP net earnings
($B) $ 2.3 $ 1.9 21% $ 8.0 $ 6.8 17%
---------------------- ------ ------ ------- ------- -------- -------
Non-GAAP diluted EPS $0.86 $0.68 26% $ 2.93 $2.38(a) 23%(a)
---------------------- ------ ------ ------- ------- -------- -------
(a) Note: excluding a favorable tax settlement in Q206, Y/Y EPS growth
was 32%
Information about HP's use of non-GAAP financial information is
provided under "Use of non-GAAP financial information" below.
Revenue in the Americas grew 10% on a year-over-year basis to
$11.9 billion. Revenue grew 19% in Europe, the Middle East and Africa
to $11.6 billion. Revenue grew 20% in Asia Pacific to $4.8 billion.
When adjusted for the effects of currency, revenue in the Americas
grew 9%, revenue in Europe, the Middle East and Africa grew 12%, and
revenue in Asia Pacific grew 14%. Revenue from outside of the United
States in the fourth quarter was 67%, with revenue in the BRIC
countries (Brazil, Russia, India and China) growing 37% over the
prior-year period and accounting for 9% of total revenue.
Personal Systems Group
Personal Systems Group (PSG) revenue grew 30% year over year to
$10.1 billion, with unit shipments up 31% on a year-over-year basis.
This fiscal year, PSG grew $7.2 billion in revenue. Notebook revenue
for the quarter grew 49% over the prior-year period, while desktop
revenue grew 15%. Commercial client revenue grew 24% year over year,
while Consumer client revenue increased 40%. PSG had exceptional
growth in emerging markets with more than 100% growth in China, its
third-largest market. Operating profit was $589 million, or 5.8% of
revenue, up from $336 million, or 4.3% of revenue, in the prior-year
period.
Imaging and Printing Group
Imaging and Printing Group (IPG) revenue grew 4% year over year to
$7.6 billion. On a year-over-year basis, supplies revenue grew 6%,
Commercial hardware revenue grew 5% and Consumer hardware revenue
declined 5%. Printer unit shipments increased 5% year over year, with
Consumer printer hardware units up 3% and Commercial printer hardware
units up 15%. Momentum in key growth initiatives continued, with
printer-based multi-function devices up 26%. Operating profit was $1.1
billion, or 14.5% of revenue, flat from the prior year period of $1.1
billion.
Enterprise Storage and Servers
Enterprise Storage and Servers (ESS) reported revenue of $5.2
billion, up 10% over the prior-year period. On a year-over-year basis,
industry-standard server revenue increased 14%, with x86 blade revenue
up 78%. Storage revenue grew 7%, with revenue growth of 6% in external
disk storage, including 17% in the midrange EVA line. Business
critical systems revenue increased 5%, with Integrity systems growth
of 59% offset by declines in PA-RISC and Alpha. Operating profit was
$693 million, or 13.5% of revenue, up from $502 million, or 10.7% of
revenue, in the prior-year period.
HP Services
HP Services (HPS) revenue increased 7% year over year to $4.4
billion. Revenue in Technology Services, Consulting and Integration,
and Outsourcing Services each grew 7% over the prior-year period.
Operating profit was $526 million, or 12.0% of revenue, up from $505
million, or 12.4% of revenue, in the prior-year period.
HP Software
HP Software revenue doubled over the prior-year period to $698
million, led by strong growth from the businesses acquired in HP's
purchase of Mercury Interactive. On a year-over-year basis, HP
OpenView grew 24% excluding Mercury. Operating profit was $177
million, or 25.4% of revenue, up from $60 million, or 17.2% of
revenue, in the prior-year period.
Financial Services
HP Financial Services (HPFS) reported revenue of $657 million, an
increase of 21% year over year. Financing volume and net portfolio
assets increased 23% and 15%, respectively, over the prior-year
period. Operating margin was 7.3% of revenue, up from 6.4% in the
comparable period last year.
Asset management
HP generated $3.6 billion in cash flow from operations for the
quarter. Inventory ended the quarter at $8.0 billion, down 4 days over
the prior year. Accounts receivable increased $2.5 billion over the
prior-year period to $13.4 billion, up 3 days over the prior-year
period. Accounts payable decreased $315 million over the prior-year
period to $11.8 billion. HP's dividend payment of $0.08 per share in
the fourth quarter resulted in cash usage of $206 million. HP utilized
$2.0 billion of cash during the fourth quarter to repurchase
approximately 42 million shares of common stock from the open market.
HP exited the quarter with $11.6 billion in gross cash, which includes
cash and cash equivalents of $11.3 billion, short-term investments of
$152 million, and certain long-term investments of $129 million.
Full year fiscal 2007
Net revenue for the full fiscal year was $104.3 billion,
representing growth of 14%, or 10% when adjusted for the effects of
currency. GAAP operating profit was $8.7 billion and GAAP diluted EPS
was $2.68, up from $2.18 in the prior-year period. Non-GAAP operating
profit was $9.6 billion, with non-GAAP diluted EPS of $2.93 up from
$2.38 in the prior-year period. Non-GAAP financial information
excludes $690 million of adjustments on an after-tax basis, or $0.25
per diluted share, related primarily to the amortization of purchased
intangible assets, in-process research and development charges,
restructuring charges and pension curtailment gains. GAAP and non-GAAP
financial information include all stock-based compensation expense in
both current and prior-year periods.
Outlook
HP estimates Q1 FY08 revenue will be approximately $27.4 billion
to $27.5 billion.
First quarter FY08 GAAP diluted EPS is expected to be $0.75, and
non-GAAP diluted EPS is expected to be $0.80. Non-GAAP diluted EPS
estimates exclude after-tax costs of approximately $0.05 per share,
related primarily to the amortization of purchased intangible assets.
HP estimates FY08 revenue will be approximately $111.5 billion.
FY08 GAAP diluted EPS is expected to be in the range of $3.12 to
$3.17, and FY08 non-GAAP diluted EPS is expected to be in the range of
$3.32 to $3.37. FY08 non-GAAP diluted EPS estimates exclude after-tax
costs of approximately $0.20 per share, related primarily to the
amortization of purchased intangible assets.
Also today, HP announced that its board of directors has
authorized an additional $8 billion for future repurchases of shares
of HP common stock.
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 FY07 earnings conference call is accessible via an audio
webcast at www.hp.com/investor/q42007webcast.
About HP
HP focuses on simplifying technology experiences for all of its
customers - from individual consumers to the largest businesses. With
a portfolio that spans printing, personal computing, software,
services and IT infrastructure, HP is among the world's largest IT
companies, with revenue totaling $104.3 billion for the fiscal year
ended October 31, 2007. More information about HP is available at
www.hp.com.
Use of non-GAAP financial information
To supplement HP's consolidated condensed financial statements
presented on a GAAP basis, HP provides non-GAAP operating profit,
non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted
earnings per share and gross cash. HP also provides forecasts of
non-GAAP diluted earnings per share. A reconciliation of the
adjustments to GAAP results for this quarter and prior periods is
included in the tables below. In addition, an explanation of the ways
in which HP management uses these non-GAAP measures to evaluate its
business, the substance behind HP management's decision to use these
non-GAAP measures, the material limitations associated with the use of
these non-GAAP measures, the manner in which HP management compensates
for those limitations, and the substantive reasons why HP management
believes that these non-GAAP measures provide useful information to
investors is included under "Use of Non-GAAP Financial Measures" after
the tables below. This additional non-GAAP financial information is
not meant to be considered in isolation or as a substitute for
operating profit, operating margin, net earnings, diluted earnings per
share, or cash and cash equivalents prepared in accordance with GAAP.
Forward-looking statements
This news release contains forward-looking statements that involve
risks, uncertainties and assumptions. If the risks or uncertainties
ever materialize or the assumptions prove incorrect, the results of HP
may differ materially from those expressed or implied by such
forward-looking statements and assumptions. All statements other than
statements of historical fact are statements that could be deemed
forward-looking statements, including but not limited to any
projections of revenue, margins, expenses, earnings, tax provisions,
cash flows, benefit obligations, share repurchases or other financial
items; any statements of the plans, strategies, and objectives of
management for future operations, including execution of cost
reduction programs and restructuring plans; any statements concerning
the expected development, performance or market share relating to
products or services; any statements regarding pending investigations,
claims or disputes; any statements of expectation or belief; and any
statements of assumptions underlying any of the foregoing. Risks,
uncertainties and assumptions include macroeconomic and geopolitical
trends and events; execution and performance of contracts by
suppliers, customers and partners; the challenge of managing asset
levels, including inventory; the difficulty of aligning expense levels
with revenue changes; assumptions related to pension and other
post-retirement costs; expectations and assumptions relating to the
execution and timing of cost reduction programs and restructuring
plans; the resolution of pending investigations, claims and disputes;
and other risks that are described in HP's Quarterly Report on Form
10-Q for the fiscal quarter ended July 31, 2007 and HP's other filings
with the Securities and Exchange Commission, including HP's Annual
Report on Form 10-K for the fiscal year ended October 31, 2006. As in
prior periods, the financial information set forth in this release,
including tax-related items, reflects estimates based on information
available at this time. While HP believes these estimates to be
meaningful, these amounts could differ materially from actual reported
amounts in HP's Annual Report on Form 10-K for the fiscal year ended
October 31, 2007. In particular, determining HP's actual tax balances
and provisions as of October 31, 2007 and for the fiscal year then
ended requires extensive internal and external review of tax data
(including consolidating and reviewing the tax provisions of numerous
domestic and foreign entities), which is being completed in the
ordinary course of preparing HP's Form 10-K. HP assumes no obligation
and does not intend to update these forward-looking statements.
Note to editors: More news from HP, including links to RSS feeds,
is available at www.hp.com/hpinfo/newsroom/.
(C) 2007 Hewlett-Packard Development Company, L.P. The information
contained herein is subject to change without notice. HP shall not be
liable for technical or editorial errors or omissions contained
herein.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Three months ended
-----------------------
October July October
31, 31, 31,
2007 2007 2006
------- ------- -------
Net revenue $28,293 $25,377 $24,555
Costs and expenses(a):
Cost of sales 21,304 19,164 18,593
Research and development 914 917 870
Selling, general and administrative 3,272 3,002 2,886
Amortization of purchased intangible
assets 187 183 153
In-process research and development
charges 4 - -
Restructuring (20) (5) 152
Pension curtailments and pension
settlements, net - - -
------- ------- -------
Total costs and expenses 25,661 23,261 22,654
------- ------- -------
Earnings from operations 2,632 2,116 1,901
Interest and other, net 81 165 190
(Losses) gains on investments (14) 5 14
------- ------- -------
Earnings before taxes 2,699 2,286 2,105
Provision for taxes(b) 535 508 408
------- ------- -------
Net earnings $2,164 $1,778 $1,697
======= ======= =======
Net earnings per share:
Basic $0.84 $0.68 $0.62
Diluted $0.81 $0.66 $0.60
Cash dividends declared per share $- $0.16 $-
Weighted-average shares used to compute net
earnings per share:
Basic 2,576 2,600 2,730
Diluted 2,678 2,697 2,816
(a) Stock-based compensation expense included
under SFAS 123(R) was as follows:
Cost of sales $40 $34 $37
Research and development 18 19 20
Selling, general and administrative 110 91 84
------- ------- -------
Total costs and expenses $168 $144 $141
(b) Tax benefit from stock-based compensation $(54) $(36) $(40)
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In millions except per share amounts)
Twelve months ended
October 31,
-------------------
2007 2006
----------- -------
(Unaudited)
Net revenue $104,286 $91,658
Costs and expenses(a):
Cost of sales 78,887 69,427
Research and development 3,611 3,591
Selling, general and administrative 12,226 11,266
Amortization of purchased intangible assets 783 604
In-process research and development charges 190 52
Restructuring 387 158
Pension curtailments and pension settlements,
net (517) -
----------- -------
Total costs and expenses 95,567 85,098
----------- -------
Earnings from operations 8,719 6,560
Interest and other, net 444 606
Gains on investments 14 25
----------- -------
Earnings before taxes 9,177 7,191
Provision for taxes(b) 1,913 993
----------- -------
Net earnings $7,264 $6,198
=========== =======
Net earnings per share:
Basic $2.76 $2.23
Diluted $2.68 $2.18
Cash dividends declared per share $0.32 $0.32
Weighted-average shares used to compute net
earnings per share:
Basic 2,630 2,782
Diluted 2,716 2,852
(a) Stock-based compensation expense included
under SFAS 123(R) was as follows:
Cost of sales $161 $144
Research and development 74 70
Selling, general and administrative 394 322
----------- -------
Total costs and expenses $629 $536
(b) Tax benefit from stock-based compensation $(182) $(160)
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Three Three Three
months months months
ended Diluted ended Diluted ended Diluted
October earnings July earnings October earnings
31, per 31, per 31, per
2007 share 2007 share 2006 share
---------------- ---------------- ----------------
GAAP net earnings $2,164 $0.81 $1,778 $0.66 $1,697 $0.60
Non-GAAP
adjustments:
Amortization of
purchased
intangible assets 187 0.07 183 0.07 153 0.05
In-process
research and
development
charges 4 - - - - -
Restructuring (20) (0.01) (5) - 152 0.05
Pension
curtailments and
pension
settlements, net - - - - - -
Gains on
investments(a) - - - - (14) -
Adjustments for
taxes (39) (0.01) (44) (0.02) (83) (0.02)
---------------- ---------------- ----------------
Non-GAAP net
earnings $2,296 $0.86 $1,912 $0.71 $1,905 $0.68
================ ================ ================
GAAP earnings from
operations $2,632 $2,116 $1,901
Non-GAAP
adjustments:
Amortization of
purchased
intangible assets 187 183 153
In-process
research and
development
charges 4 - -
Restructuring (20) (5) 152
Pension
curtailments and
pension
settlements, net - - -
------- ------- -------
Non-GAAP earnings
from operations $2,803 $2,294 $2,206
======= ======= =======
GAAP operating
margin 9% 8% 8%
Non-GAAP
adjustments 1% 1% 1%
------- ------- -------
Non-GAAP operating
margin 10% 9% 9%
======= ======= =======
(a) Beginning in fiscal 2007, HP no longer excludes gains or losses on
investments when calculating financial measures presented on a non-
GAAP basis.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Twelve Twelve
months months
ended Diluted ended Diluted
October earnings October earnings
31, per 31, per
2007 share 2006 share
---------------- ----------------
GAAP net earnings $7,264 $2.68 $6,198 $2.18
Non-GAAP adjustments:
Amortization of purchased
intangible assets 783 0.29 604 0.21
In-process research and
development charges 190 0.07 52 0.02
Restructuring 387 0.14 158 0.06
Pension curtailments and
pension settlements, net (517) (0.19) - -
Gains on investments(a) - - (25) (0.01)
Adjustments for taxes (153) (0.06) (210) (0.08)
---------------- ----------------
Non-GAAP net earnings $7,954 $2.93 $6,777 $2.38
================ ================
GAAP earnings from operations $8,719 $6,560
Non-GAAP adjustments:
Amortization of purchased
intangible assets 783 604
In-process research and
development charges 190 52
Restructuring 387 158
Pension curtailments and
pension settlements, net (517) -
------- -------
Non-GAAP earnings from operations $9,562 $7,374
======= =======
GAAP operating margin 8% 7%
Non-GAAP adjustments 1% 1%
------- -------
Non-GAAP operating margin 9% 8%
======= =======
(a) Beginning in fiscal 2007, HP no longer excludes gains or losses on
investments when calculating financial measures presented on a non-
GAAP basis.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
October 31, October 31,
2007 2006
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $11,293 $16,400
Short-term investments 152 22
Accounts receivable 13,420 10,873
Financing receivables 2,507 2,440
Inventory 8,033 7,750
Other current assets 11,997 10,779
----------- -----------
Total current assets 47,402 48,264
----------- -----------
Property, plant and equipment 7,798 6,863
Long-term financing receivables and other
assets 7,647 6,649
Goodwill and purchased intangible assets 25,852 20,205
----------- -----------
Total assets $88,699 $81,981
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $3,186 $2,705
Accounts payable 11,787 12,102
Employee compensation and benefits 3,465 3,148
Taxes on earnings 1,891 1,905
Deferred revenue 5,025 4,309
Accrued restructuring 123 547
Other accrued liabilities 13,783 11,134
----------- -----------
Total current liabilities 39,260 35,850
----------- -----------
Long-term debt 4,997 2,490
Other liabilities 5,916 5,497
Stockholders' equity 38,526 38,144
----------- -----------
Total liabilities and stockholders' equity $88,699 $81,981
=========== ===========
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months ended Twelve months ended
October 31, 2007 October 31, 2007
------------------ -------------------
Cash flows from operating
activities:
Net earnings $2,164 $7,264
Adjustments to reconcile net
earnings to
net cash provided by
operating activities:
Depreciation and
amortization 699 2,705
Stock-based compensation
expense 168 629
Provision for bad debt and
inventory 137 409
Losses (gains) on
investments 14 (14)
In-process research and
development charges 4 190
Restructuring (20) 387
Pension curtailments and
pension settlements, net - (517)
Deferred taxes on earnings 116 415
Excess tax benefit from
stock-based compensation (141) (481)
Other, net 38 (86)
Changes in assets and
liabilities:
Accounts and financing
receivables (1,843) (2,808)
Inventory (130) (633)
Accounts payable 100 (346)
Taxes on earnings 321 502
Restructuring (67) (606)
Other assets and
liabilities 2,049 2,605
------------------ -------------------
Net cash provided by
operating activities 3,609 9,615
------------------ -------------------
Cash flows from investing
activities:
Investment in property,
plant and equipment (813) (3,040)
Proceeds from sale of
property, plant and
equipment 65 568
Purchases of available-
for-sale securities
and other investments (247) (283)
Maturities and sales of
available-for-sale
securities and other
investments 22 425
Payments made in
connection with business
acquisitions, net (1,900) (6,793)
------------------ -------------------
Net cash used in
investing activities (2,873) (9,123)
------------------ -------------------
Cash flows from financing
activities:
Issuance of commercial
paper and notes payable,
net (461) 1,863
Issuance of debt - 4,106
Payment of debt (37) (3,419)
Issuance of common stock
under employee stock plans 710 3,103
Repurchase of common stock (2,040) (10,887)
Excess tax benefit from
stock-based compensation 141 481
Dividends (206) (846)
------------------ -------------------
Net cash used in
financing activities (1,893) (5,599)
------------------ -------------------
Decrease in cash and cash
equivalents (1,157) (5,107)
Cash and cash equivalents at
beginning of period 12,450 16,400
------------------ -------------------
Cash and cash equivalents at
end of period $11,293 $11,293
================== ===================
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Three months ended
-----------------------
October July October
31, 31, 31,
2007 2007 2006(a)
------- ------- -------
Net revenue:
Enterprise Storage and Servers $5,150 $4,547 $4,670
HP Services 4,367 4,186 4,080
HP Software 698 554 349
------- ------- -------
Technology Solutions Group 10,215 9,287 9,099
------- ------- -------
Personal Systems Group 10,133 8,894 7,823
Imaging and Printing Group 7,554 6,751 7,283
HP Financial Services 657 582 545
Corporate Investments 210 220 160
------- ------- -------
Total Segments 28,769 25,734 24,910
Eliminations of intersegment
net revenue and other (476) (357) (355)
------- ------- -------
Total HP Consolidated $28,293 $25,377 $24,555
======= ======= =======
Earnings from operations:
Enterprise Storage and Servers $693 $464 $502
HP Services 526 430 505
HP Software 177 81 60
------- ------- -------
Technology Solutions Group 1,396 975 1,067
------- ------- -------
Personal Systems Group 589 519 336
Imaging and Printing Group 1,094 981 1,080
HP Financial Services 48 39 35
Corporate Investments (5) (5) (36)
------- ------- -------
Total Segments 3,122 2,509 2,482
Corporate and unallocated costs and
eliminations (197) (101) (156)
Unallocated costs related to stock-based
compensation expense (122) (114) (120)
Amortization of purchased intangible
assets (187) (183) (153)
In-process research and development
charges (4) - -
Restructuring 20 5 (152)
Pension curtailments and pension
settlements, net - - -
Interest and other, net 81 165 190
(Losses) gains on investments (14) 5 14
------- ------- -------
Total HP Consolidated Earnings Before
Taxes $2,699 $2,286 $2,105
======= ======= =======
(a) Certain fiscal 2007 organizational realignments have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2006, the
realignments primarily resulted in revenue movement within business
units within the ESS and HPS segments. There was no impact to total
segment revenue.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Twelve months
ended
October 31,
----------------
2007 2006(a)
-------- -------
Net revenue:
Enterprise Storage and Servers $18,769 $17,308
HP Services 16,646 15,617
HP Software 2,325 1,301
-------- -------
Technology Solutions Group 37,740 34,226
-------- -------
Personal Systems Group 36,409 29,166
Imaging and Printing Group 28,465 26,786
HP Financial Services 2,336 2,078
Corporate Investments 762 566
-------- -------
Total Segments 105,712 92,822
Eliminations of intersegment
net revenue and other (1,426) (1,164)
-------- -------
Total HP Consolidated $104,286 $91,658
======== =======
Earnings from operations:
Enterprise Storage and Servers $1,980 $1,446
HP Services 1,829 1,507
HP Software 347 85
-------- -------
Technology Solutions Group 4,156 3,038
-------- -------
Personal Systems Group 1,939 1,152
Imaging and Printing Group 4,315 3,978
HP Financial Services 155 147
Corporate Investments (57) (151)
-------- -------
Total Segments 10,508 8,164
Corporate and unallocated costs and
eliminations (439) (331)
Unallocated costs related to stock-based
compensation expense (507) (459)
Amortization of purchased intangible assets (783) (604)
In-process research and development charges (190) (52)
Restructuring (387) (158)
Pension curtailments and pension settlements,
net 517 -
Interest and other, net 444 606
(Losses) gains on investments 14 25
-------- -------
Total HP Consolidated Earnings Before Taxes $9,177 $7,191
======== =======
(a) Certain fiscal 2007 organizational realignments have been
reflected retroactively to provide improved visibility and
comparability. For fiscal year 2006, the realignments primarily
resulted in revenue movement within business units within the ESS and
HPS segments. There was no impact to total segment revenue.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Three months ended
-----------------------
October July October
31, 31, 31,
2007 2007 2006(a)
------- ------- -------
Net revenue:
Industry Standard Servers $3,059 $2,814 $2,694
Business Critical Systems 1,043 811 997
Storage 1,048 922 979
------- ------- -------
Enterprise Storage and Servers 5,150 4,547 4,670
------- ------- -------
Technology Services 2,266 2,164 2,117
Outsourcing Services(b) 1,267 1,234 1,185
Consulting and Integration 834 788 778
------- ------- -------
HP Services 4,367 4,186 4,080
------- ------- -------
OpenView 616 481 251
OpenCall and Other 82 73 98
------- ------- -------
HP Software 698 554 349
------- ------- -------
Technology Solutions Group 10,215 9,287 9,099
------- ------- -------
Desktops 4,210 3,924 3,675
Notebooks 5,161 4,253 3,463
Workstations 473 441 362
Handhelds 97 105 139
Other 192 171 184
------- ------- -------
Personal Systems Group 10,133 8,894 7,823
------- ------- -------
Commercial Hardware 1,968 1,738 1,873
Consumer Hardware 1,237 982 1,296
Supplies 4,335 4,017 4,100
Other 14 14 14
------- ------- -------
Imaging and Printing Group 7,554 6,751 7,283
------- ------- -------
HP Financial Services 657 582 545
Corporate Investments 210 220 160
------- ------- -------
Total Segments 28,769 25,734 24,910
------- ------- -------
Eliminations of intersegment
net revenue and other (476) (357) (355)
------- ------- -------
Total HP Consolidated $28,293 $25,377 $24,555
======= ======= =======
(a) Certain fiscal 2007 organizational realignments have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2006, the
realignments primarily resulted in revenue movement within business
units within the ESS and HPS segments. There was no impact to total
segment revenue.
(b) Reflects name change from Managed Services to Outsourcing Services
effective in fiscal 2007.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Twelve months
ended
October 31,
----------------
2007 2006(a)
-------- -------
Net revenue:
Industry Standard Servers $11,380 $9,982
Business Critical Systems 3,564 3,656
Storage 3,825 3,670
-------- -------
Enterprise Storage and Servers 18,769 17,308
-------- -------
Technology Services 8,678 8,348
Outsourcing Services(b) 4,821 4,382
Consulting and Integration 3,147 2,887
-------- -------
HP Services 16,646 15,617
-------- -------
OpenView 1,988 899
OpenCall and Other 337 402
-------- -------
HP Software 2,325 1,301
-------- -------
Technology Solutions Group 37,740 34,226
-------- -------
Desktops 15,850 14,613
Notebooks 17,642 12,000
Workstations 1,721 1,368
Handhelds 490 620
Other 706 565
-------- -------
Personal Systems Group 36,409 29,166
-------- -------
Commercial Hardware 7,181 6,899
Consumer Hardware 4,442 4,427
Supplies 16,788 15,402
Other 54 58
-------- -------
Imaging and Printing Group 28,465 26,786
-------- -------
HP Financial Services 2,336 2,078
Corporate Investments 762 566
-------- -------
Total Segments 105,712 92,822
-------- -------
Eliminations of intersegment
net revenue and other (1,426) (1,164)
-------- -------
Total HP Consolidated $104,286 $91,658
======== =======
(a) Certain fiscal 2007 organizational realignments have been
reflected retroactively to provide improved visibility and
comparability. For fiscal year 2006, the realignments primarily
resulted in revenue movement within business units within the ESS and
HPS segments. There was no impact to total segment revenue.
(b) Reflects name change from Managed Services to Outsourcing Services
effective in fiscal 2007.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Three months ended
----------------------
October July October
31, 31, 31,
2007 2007 2006
------- ------ -------
Numerator:
Net earnings $2,164 $1,778 $1,697
Adjustment for interest expense on zero-
coupon
subordinated convertible notes, net of taxes 2 1 2
------- ------ -------
Net earnings, adjusted $2,166 $1,779 $1,699
======= ====== =======
Denominator:
Weighted-average shares used to compute
basic EPS 2,576 2,600 2,730
Effect of dilutive securities:
Dilution from employee stock plans 94 89 78
Zero-coupon subordinated convertible notes 8 8 8
------- ------ -------
Dilutive potential common shares 102 97 86
------- ------ -------
Weighted-average shares used to compute
diluted EPS 2,678 2,697 2,816
======= ====== =======
Net earnings per share:
Basic(a) $0.84 $0.68 $0.62
Diluted(b) $0.81 $0.66 $0.60
(a) HP's basic earnings per share was calculated based on net earnings
and the weighted-average number of shares outstanding during the
reporting period.
(b) The diluted earnings per share included additional dilution from
potential issuance of common stock, such as stock issuable pursuant
to exercise of stock options and conversion of debt, except when such
issuances would be antidilutive.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(In millions except per share amounts)
Twelve months
ended
October 31,
------------------
2007 2006
----------- ------
(Unaudited)
Numerator:
Net earnings $7,264 $6,198
Adjustment for interest expense on zero coupon
subordinated convertible notes, net of taxes 7 7
----------- ------
Net earnings, adjusted $7,271 $6,205
=========== ======
Denominator:
Weighted-average shares used to compute
basic EPS 2,630 2,782
Effect of dilutive securities:
Dilution from employee stock plans 78 62
Zero-coupon subordinated convertible notes 8 8
----------- ------
Dilutive potential common shares 86 70
----------- ------
Weighted-average shares used to compute
diluted EPS 2,716 2,852
=========== ======
Net earnings per share:
Basic(a) $2.76 $2.23
Diluted(b) $2.68 $2.18
(a) HP's basic earnings per share was calculated based on net earnings
and the weighted-average number of shares outstanding during the
reporting period.
(b) The diluted earnings per share included additional dilution from
potential issuance of common stock, such as stock issuable pursuant
to exercise of stock options and conversion of debt, except when such
issuances would be antidilutive.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Three months ended
----------------------
October July October
31, 31, 31,
2007 2007 2006
------- ------ -------
Numerator:
Non-GAAP net earnings $2,296 $1,912 $1,905
Adjustment for interest expense on zero-
coupon subordinated convertible notes,
net of taxes 2 1 2
------- ------ -------
Non-GAAP net earnings, adjusted $2,298 $1,913 $1,907
======= ====== =======
Denominator:
Weighted-average shares used to compute
basic EPS 2,576 2,600 2,730
Effect of dilutive securities:
Dilution from employee stock plans 94 89 78
Zero-coupon subordinated convertible notes 8 8 8
------- ------ -------
Dilutive potential common shares 102 97 86
------- ------ -------
Weighted-average shares used to compute
diluted EPS 2,678 2,697 2,816
======= ====== =======
Non-GAAP net earnings per share:
Basic(a) $0.89 $0.74 $0.70
Diluted(b) $0.86 $0.71 $0.68
(a) HP's basic non-GAAP earnings per share was calculated based on
non-GAAP net earnings and the weighted-average number of shares
outstanding during the reporting period.
(b) HP's diluted non-GAAP earnings per share included additional
dilution from potential issuance of common stock, such as stock
issuable pursuant to exercise of stock options and conversion of
debt, except when such issuances would be antidilutive.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Twelve months
ended
October 31,
-------------
2007 2006
------ ------
Numerator:
Non-GAAP net earnings $7,954 $6,777
Adjustment for interest expense on zero
coupon subordinated convertible notes,
net of taxes 7 7
------ ------
Non-GAAP net earnings, adjusted $7,961 $6,784
====== ======
Denominator:
Weighted-average shares used to compute
basic EPS 2,630 2,782
Effect of dilutive securities:
Dilution from employee stock plans 78 62
Zero-coupon subordinated convertible notes 8 8
------ ------
Dilutive potential common shares 86 70
------ ------
Weighted-average shares used to compute
diluted EPS 2,716 2,852
====== ======
Non-GAAP net earnings per share:
Basic(a) $3.02 $2.44
Diluted(b) $2.93 $2.38
(a) HP's basic non-GAAP earnings per share was calculated based on
non-GAAP net earnings and the weighted-average number of shares
outstanding during the reporting period.
(b) HP's diluted non-GAAP EPS included additional dilution from
potential issuance of common stock, such as stock issuable pursuant
to exercise of stock options and conversion of debt, except when such
issuances would be antidilutive.
Use of Non-GAAP Financial Measures
To supplement HP's consolidated condensed financial statements
presented on a GAAP basis, HP provides non-GAAP operating profit,
non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted
earnings per share and gross cash. HP also provides forecasts of
non-GAAP diluted earnings per share. These non-GAAP financial measures
are not in accordance with, or an alternative for, generally accepted
accounting principles in the United States. The GAAP measure most
directly comparable to non-GAAP operating profit is earnings from
operations. The GAAP measure most directly comparable to non-GAAP
operating margin is operating margin. The GAAP measure most directly
comparable to non-GAAP net earnings is net earnings. The GAAP measure
most directly comparable to non-GAAP diluted earnings per share is
diluted net earnings per share. The GAAP measure most directly
comparable to gross cash is cash and cash equivalents. Reconciliations
of each of these non-GAAP financial measures to GAAP information are
included in the tables above.
Use and Economic Substance of Non-GAAP Financial Measures Used by
HP
Non-GAAP operating profit and non-GAAP operating margin are
defined to exclude the effects of any restructuring charges, charges
relating to the amortization of purchased intangible assets, pension
curtailment and settlement gains and losses, and in-process research
and development charges recorded during the relevant period. Non-GAAP
net earnings and non-GAAP diluted earnings per share consist of net
earnings or diluted net earnings per share excluding those same
charges as well as any gains or losses on investments recorded for
periods ending on or before October 31, 2006. In addition, non-GAAP
net earnings and non-GAAP diluted earnings per share are adjusted by
the amount of additional taxes or tax benefit associated with each
non-GAAP item. HP's management uses these non-GAAP financial measures
for purposes of evaluating HP's historical and prospective financial
performance, as well as HP's performance relative to its competitors.
HP's management also uses these non-GAAP measures to further its own
understanding of HP's segment operating performance. HP believes that
excluding those items mentioned above from these non-GAAP financial
measures allows HP management to better understand HP's consolidated
financial performance in relationship to the operating results of HP's
segments, as management does not believe that the excluded items are
reflective of ongoing operating results. More specifically, HP's
management excludes each of those items mentioned above for the
following reasons:
-- Restructuring charges consist of costs primarily related to
severance and benefits for employees terminated pursuant to a
formal restructuring plan, including strategic reallocations
or workforce reductions and early retirement programs. HP
excludes these restructuring costs (and any reversals of
charges recorded in prior periods) for purposes of calculating
these non-GAAP measures because it believes that these
historical costs do not reflect expected future operating
expenses and do not contribute to a meaningful evaluation of
HP's current operating performance or comparisons to HP's past
operating performance.
-- Purchased intangible assets consist primarily of customer
contracts, customer lists, distribution agreements, technology
patents, and products, trademarks and trade names purchased in
connection with acquisitions. HP incurs charges relating to
the amortization of these intangibles, and those charges are
included in HP's GAAP presentation of earnings from
operations, operating margin, net earnings and net earnings
per share. Amortization charges for HP's purchased intangible
assets are inconsistent in amount and frequency and are
significantly impacted by the timing and magnitude of HP's
acquisitions. Consequently, HP excludes these charges for
purposes of calculating these non-GAAP measures to facilitate
a more meaningful evaluation of HP's current operating
performance and comparisons to HP's past operating
performance.
-- In the first quarter of fiscal 2007, HP recognized a net
curtailment gain for its non-U.S. pension plans. The net gain
primarily reflects a plan design change in Mexico where HP
ceased pension accruals for current employees who did not meet
defined criteria based on age and years of service (calculated
as of December 31, 2006). In the second quarter of fiscal
2007, HP recorded a pension curtailment gain primarily
resulting from the decision to cease pension accruals under
its U.S. defined benefit pension plan for all employees who
were still accruing benefits under that plan. The curtailment
gain was partially offset primarily by a settlement expense
associated with the distribution and subsequent transfer of
accrued pension benefits from HP's U.S. Excess Benefit Plan to
HP's U.S. Executive Deferred Compensation Plan for the
terminated vested plan participants. Because pension
curtailment gains and pension settlement losses are
inconsistent in amount and frequency, HP believes that
eliminating these gains and losses for purposes of calculating
these non-GAAP measures facilitates a more meaningful
evaluation of HP's current operating performance and
comparisons to HP's past operating performance.
-- In-process research and development charges relate to amounts
assigned to tangible and intangible assets to be used in
research and development projects that have no alternative
future use and therefore are charged to expense at the
acquisition date. Charges for in-process research and
development in connection with HP's acquisitions are reflected
in HP's GAAP presentation of earnings from operations,
operating margin, net earnings and net earnings per share.
In-process research and development expenses are not
indicative of HP's ongoing operating costs and are generally
unpredictable. Accordingly, HP believes that eliminating these
expenses for purposes of calculating these non-GAAP measures
contributes to a meaningful evaluation of HP's current
operating performance and comparisons to HP's past operating
performance.
-- HP's investments consist principally of time deposits, other
debt securities and equity securities of publicly traded and
privately held companies. HP sells investments or adjusts the
value of investments from time to time based on market
conditions and, in the case of investments in equity
securities, the strategic value of such investments. HP's
activities in this regard are included in its GAAP
presentation of net income and net earnings per share. Because
the amount and timing of these gains or losses and adjustments
are unpredictable, HP eliminated these gains or losses and
adjustments for purposes of calculating non-GAAP net earnings
and non-GAAP diluted earnings per share for periods ending on
or before October 31, 2006. Beginning in fiscal 2007, HP no
longer excludes gains or losses on investments when
calculating non-GAAP net earnings and non-GAAP diluted
earnings per share, as the amounts of those gains and losses
have been immaterial in recent periods.
Gross cash is a non-GAAP measure that is defined as cash and cash
equivalents plus short-term investments and certain long-term
investments that may be liquidated within 90 days pursuant to the
terms of existing put options or similar rights. HP's management uses
gross cash for the purpose of determining the amount of cash available
for investment in HP's businesses, funding strategic acquisitions,
repurchasing stock and other purposes. HP's management also uses gross
cash for the purposes of evaluating HP's historical and prospective
liquidity, as well as to further its own understanding of HP's segment
operating results. Because gross cash includes liquid assets that are
not included in GAAP cash and cash equivalents, HP believes that gross
cash provides a more accurate and complete assessment of HP's
liquidity and segment operating results.
Material Limitations Associated with Use of Non-GAAP Financial
Measures
These non-GAAP financial measures may have limitations as
analytical tools, and these measures should not be considered in
isolation or as a substitute for analysis of HP's results as reported
under GAAP. Some of the limitations in relying on these non-GAAP
financial measures are:
-- Items such as amortization of purchased intangible assets,
though not directly affecting HP's cash position, represent
the loss in value of intangible assets over time. The expense
associated with this loss in value is not included in non-GAAP
operating profit, non-GAAP operating margin, non-GAAP net
earnings and non-GAAP diluted earnings per share and therefore
does not reflect the full economic effect of the loss in value
of those intangible assets.
-- Items such as restructuring charges that are excluded from
non-GAAP operating profit, non-GAAP operating margin, non-GAAP
net earnings and non-GAAP diluted earnings per share can have
a material impact on cash flows and earnings per share.
-- HP may not be able to liquidate immediately the long-term
investments included in gross cash, which may limit the
usefulness of gross cash as a liquidity measure.
-- Other companies may calculate non-GAAP operating profit,
non-GAAP operating margin, non-GAAP net earnings, non-GAAP
diluted earnings per share and gross cash differently than HP
does, limiting the usefulness of those measures for
comparative purposes.
Compensation for Limitations Associated with Use of Non-GAAP
Financial Measures
HP compensates for the limitations on our use of non-GAAP
operating profit, non-GAAP operating margin, non-GAAP net earnings,
non-GAAP diluted earnings per share and gross cash by relying
primarily on its GAAP results and using non-GAAP financial measures
only supplementally. HP also provides robust and detailed
reconciliations of each non-GAAP financial measure to its most
directly comparable GAAP measure within this press release and in
other written materials that include these non-GAAP financial
measures, and HP encourages investors to review carefully those
reconciliations.
Usefulness of Non-GAAP Financial Measures to Investors
HP believes that providing non-GAAP operating profit, non-GAAP
operating margin, non-GAAP net earnings, non-GAAP diluted earnings per
share and gross cash to investors in addition to the related GAAP
measures provides investors with greater transparency to the
information used by HP's management in its financial and operational
decision-making and allows investors to see HP's results "through the
eyes" of management. HP further believes that providing this
information better enables HP's investors to understand HP's operating
performance and to evaluate the efficacy of the methodology and
information used by management to evaluate and measure such
performance. Disclosure of these non-GAAP financial measures also
facilitates comparisons of HP's operating performance with the
performance of other companies in HP's industry that supplement their
GAAP results with non-GAAP financial measures that are calculated in a
similar manner.
CONTACT: HP
Robert Sherbin, +1-650-857-2381
robert.sherbin@hp.com
Emma McCulloch, +1-650-857-4183
emcculloch@hp.com
or
HP Media Hotline, +1-866-266-7272
pr@hp.com
www.hp.com/go/newsroom
SOURCE: HP
