Trends and regional performance
HP’s Commercial businesses remain healthy with 5% revenue growth year over year. HP’s Consumer businesses, within PSG and IPG, were collectively down 15% year over year.
Third quarter revenue was flat year over year in the Americas as well as in Europe, the Middle East and Africa at $14.1 billion and $11.0 billion, respectively. Revenue in Asia Pacific was $6.1 billion, representing a 9% increase year over year. When adjusted for the effects of currency, revenue was down 2% in the Americas, down 5% in Europe, the Middle East and Africa and up 1% in Asia Pacific. Revenue from outside of the United States in the third quarter accounted for 65% of total HP revenue. BRIC countries (Brazil, Russia, India and China) generated revenue of $3.7 billion, up 12% over the year-ago period, accounting for 12% of total HP revenue.
Business group highlights
- Services revenue grew 4% year over year with a 13.5% operating margin. HP also announced the appointment of John Visentin as the new executive vice president for Enterprise Services reporting to Apotheker.
- Enterprise Servers, Storage and Networking (ESSN) revenue grew 7% year over year with a 13.0% operating margin. Networking was up 15%, Industry Standard Servers was up 9%, Business Critical Systems was down 9%, and HP Storage was up 8%. 3PAR revenue accelerated, with triple-digit year-over-year growth operationally.
- HP Software revenue grew 20% year over year with a 19.4% operating margin. HP Software revenue was driven by strong growth in licenses and services of 29% and 30%, respectively.
- Personal Systems Group (PSG) revenue declined 3% year over year with a 5.9% operating margin. PSG remains the PC market leader in terms of units, revenue and profit share. Commercial Client revenue grew 9% and Consumer Client revenue declined 17%.
- Imaging and Printing Group (IPG) revenue declined 1% year over year with a 14.7% operating margin. Commercial revenue was down 7% year over year with commercial printer hardware units up 1%. Consumer printer hardware revenue was up 1% year over year on 7% unit growth. IPG continued to drive innovation and momentum with digital presses and web-connected printers.
- Financial Services revenue grew 22% 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 $3.2 billion in cash flow from operations in the third quarter. Inventory ended the quarter at $7.4 billion, with days of inventory flat year over year at 28 days. Accounts receivable of $18.1 billion was up 6 days year over year at 52 days. Accounts payable ended the quarter at $14.5 billion, down 3 days from the prior-year period. HP’s dividend payment of $0.12 per share in the third quarter resulted in cash usage of $248 million. HP also utilized $4.6 billion of cash during the quarter to repurchase approximately 128 million shares of common stock in the open market. HP exited the quarter with $13.0 billion in gross cash.
Outlook
For the fourth quarter of fiscal 2011, HP estimates revenue of approximately $32.1 billion to $32.5 billion, GAAP diluted EPS of approximately $0.44 to $0.55, and non-GAAP diluted EPS of approximately $1.12 to $1.16.
Fourth quarter fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.61 to $0.68 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.
HP expects full year fiscal 2011 revenue in the range $127.2 billion to $127.6 billion, GAAP diluted EPS of $3.59 to $3.70, and non-GAAP diluted EPS of $4.82 to $4.86.
Full year fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.16 to $1.23 per share, related primarily to restructuring and shutdown costs associated with webOS devices, the amortization and impairment 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.
