HP reports drop in revenue

26 Feb 2003

Hewlett-Packard (HP) has reported financial results for its first fiscal quarter ended 31 January, 2003. The company reported first quarter revenue of US$17.9bn, compared with US$18bn in the prior quarter.

The company stated this reflected ongoing weakness in commercial IT spending in the US and Japan, while Europe and Asia-Pacific posted solid revenue growth quarter over quarter.

Non-GAAP (generally accepted accounting principles), formerly reported as pro forma, operating profit totalled US$1.1bn, up 25pc sequentially. Non-GAAP operating profit was 6.2pc of revenue, up from 4.9pc of revenue in the prior quarter. Non-GAAP diluted earnings per share (EPS) for the quarter was 29 cents, compared to 24 cents in the fourth quarter, up 21pc sequentially. Non-GAAP diluted EPS and operating profit reflect a US$156m adjustment on an after-tax basis, or 5 cents on a diluted per share basis. The pre-tax adjustment includes US$138m of amortization of purchased intangible assets, and US$86m for other acquisition-related items.

GAAP operating profit for the quarter was US$879m, up 107pc sequentially. GAAP operating profit was 4.9pc of revenue, up from 2.4pc in the prior quarter. GAAP diluted EPS was 24 cents per share, versus 13 cents last quarter, representing an improvement of 85pc sequentially.

Gross margin increased from 25.9pc to 26.5pc, up 0.6 percentage points sequentially, reflecting continued improvement in HP’s cost structures. Integration-related cost savings for the first quarter were US$734m, up from US$482m last quarter and 14pc above first-quarter plan.

Non-GAAP expenses as a percent of revenue were down sequentially from 21pc to 20.3pc of net revenue.

“HP is making good headway and continues to execute well,” said Carly Fiorina, HP chairman and chief executive officer. “The first quarter was our best overall profit performance since the merger, demonstrating there is significant leverage in our operating model. We made good progress on cost structures, achieved sequential market share gains in each of our businesses and continued to improve gross margins. Our revenue shortfalls were largely confined to the US market, as weak commercial spending continued. Outside the US, revenues improved 3pc sequentially with strong performance in Europe and Asia-Pacific. Personal Systems posted a profit for the quarter and Enterprise Systems improved operating results by 36pc sequentially. Today’s world is full of uncertainty and predictions are difficult. We’re staying focused on what we can control – maximizing our operating model leverage, delivering the best possible products and services, accelerating market share gains, staying on the offence and investing in growth. Therefore, we’re comfortable affirming analyst consensus estimates of 27 cents for the second quarter,” she said.

By Dick O’Brien