Thursday, August 18, 2011

HP Reports Lower Quarterly Performance (Financial Charts) *Announces historic company transition* HPQ

^v^ ^v^ ^v^


HP reported QE July 2011 financial results on Thursday, August 18, 2011
*Charts and commentary have been updated for HP QE July 2011 financial results*


HP Reports Lower Quarterly Performance: Announces historic company transition

HP Summary QE July 2011 Financial performance dropped again in QE July 2011 from the prior quarter. Total revenues, operating income, net income, earnings per share, cash flow per share, gross margin, operating margin, and net margin all decreased QoQ. Debt increased to 20.6% of total assets. This quarter, the QE July, is not historically a strong quarter for HP. The QE October and QE January are usually stronger quarters. However, HP has cut the QE October 2011 outlook for earnings per share to $0.44 - $0.55, even though revenues will be a projected higher $32.1B - $32.5B QoQ. This is due to a "company transition" and the resulting costs and charges (see below). HP has a large, embedded product financing operation which results in lower financial performance than other technology companies. Financial position continues as acceptable, with adequate capital, moderate debt, and adequate liquidity.

HP Income Statement QE July 2011 HP reported total revenues of $31.19B, net income of $1.93B, and earnings per share of $0.93. From the prior quarter QE April 2011, total revenues were down -1.4%, net income down -16.4%, and earnings per share down -11.4%. From the prior year QE July 2010, these were up +1.5%, up +8.6%, and up +24.0%, respectively. Gross margin was down to a 6-quarter low of  23.28%, operating margin was down to a 4-quarter low of 8.08%, and net margin was down to a 4-quarter low of 6.18%. Cash flow from operations of $1.54 is above the historical average, but a 2-quarter low. The operating expense ratio (operating expenses divided by total revenues) of 15.20% is higher than the historical average, but flat QoQ.

HP Balance Sheet QE July 2011 HP's total assets decreased slightly -0.2% QoQ to $124.92 billion from the prior record quarter of $125.13 billion. The capital to assets ratio (total stockholders' equity divided by total assets) of 31.40% is adequate, but a multi-year low. The current ratio (current assets divided by total assets) of 45.05% is within the historical range and a 4-quarter high. The return on assets of +7.63% is about average. Total debt is higher at 20.57% of total assets and a multi-quarter high.

Historic Company Transition HP announced along with the QE July 2011 quarterly earnings that a historic company transition has been initiated. The gist: HP is leaving the consumer PC market, leaving the webOS mobile device market, and entering enterprise cloud computing services. HP plans to separate the Personal Systems Group through "spin-off or other transaction". HP plans to "discontinue operations for webOS devices, specifically the TouchPad and webOS phones". HP announced the acquisition of Autonomy Corporation plc, a UK company that "is a global leader in infrastructure software for the enterprise with a customer base of more than 25,000 global companies, law firms and public sector agencies, and approximately 2,700 employees worldwide. Autonomy has an attractive business model, including a strong cloud based solution set, which is aligned with HP’s efforts to improve our portfolio mix. We believe this bold action will squarely position HP in software and information to create the next-generation Information Platform, and thereby, create significant value for our shareholders.”  

HP Outlook QE October 2011 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 Outlook FY 2011 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.


HP Financial Performance by the Quarters (Charts)

HP Earnings Per Share Below is a chart of quarterly earnings per share. Current Earnings per Share of $.093 are down -11% QoQ and up +24% YoY. The recent peak was prior QE January 2011 of $1.17. The lows have been $0.75 in QE July 2010 and $0.69 in QE July 2009. The chart average EPS, since QE October 2008, is $0.90.


HP Cash Flow per Share Below is a chart of cash flow from operations per share. Current Cash Flow per Share of $1.54 is above average, but a 2-quarter low. The peak was $2.04 in QE April 2010. The lows have been QE January 2009 of $0.99 and QE January 2009 of $0.46. The chart average CFS, since QE October 2008, is $1.38.


HP Total Revenues, Operating Income, and Net Income Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues of $31.19B is a 4-quarter low, down -1% QoQ and up +1% YoY. Total Revenues have generally been stable for the past 8 quarters, ranging from a low of $30.73B in QE July 2010 to a high of $33.28B in QE October 2010. The chart average TR, since QE October 2009, is $31.49B. Current Operating Income of $2.52B is also a 4-quarter low and has ranged from a low of $2.32B in QE July 2010 and a high of $3.39B in QE January 2011 in the past 8 quarters. The chart average OI, since QE October 2009, is $2.94B. Current Net Income of $1.93B is also a 4-quarter low, down -16% QoQ and up +9% YoY. Net Income has ranged from a low of $1.78B in QE  July 2010 to a high of $2.61B in QE January 2011. The chart average NI, since QE October 2009, is $2.25B.


HP Gross Margin, Operating Margin, and Net Margin Below is a chart of quarterly gross margin, operating margin, and net margin. Current Gross Margin of 23.28% is a 6-quarter low. The chart average GM, since QE October 2009, is 23.91%. Current Operating Margin of 8.08% is a 4-quarter low and was pulled down mostly by a decrease in Gross Profit. The chart average OM, since QE October 2009, is 9.31%. Current Net Margin of 6.18% is a 4-quarter low. The chart average OM, since QE October 2009, is 7.14%. The average income tax rate of 19.72% is a 4-quarter low.


HP Return on Assets Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. Current Return on Assets of +7.63% is historically about average. Return on Assets has been stable in the 7%+ range. The chart average ROA, since QE April 2010, is 7.57%.


HP Growth Rates Below is a chart of the quarterly (QoQ, Q/Q, quarterly change) growth rates for total revenues and earnings per share. Current Total Revenues Growth of -1.40% is the 3rd consecutive decrease and the 5th decrease in the past 6 quarters. The chart average TRG, since QE October 2009, is +1.66%. Current Earnings per Share Growth of -11.43% is the 2nd consecutive decrease. The chart average EPSG, since QE October 2009, is 6.13%.


HP Revenue Sources Below is a chart of quarterly revenue sources, as a percentage of total revenues. The trend is a increases in Services and Personal Systems are offset by decreases in Image, Printing and Servers, Storage, Networking.


HP Geographic Revenues Below is a chart of quarterly geographic revenues, as a percentage of total revenues. For the current quarter, Americas revenues were $14.1B and 45% of total revenues. Europe, Middle East, Africa were $11.0B and 35% and Asia Pacific was $6.1B and 20%. International sales, outside of U.S., were 65% of total revenues and included within the above totals. BRIC countries (Brazil, Russia, India, and China) were 12% of total revenues and included within the above totals.


HP Operating Expense Ratio Below is a chart of quarterly operating expense ratio, which is operating expenses divided by total revenues. The current Operating Expense Ratio of 15.20% is flat QoQ, above historical average, and a 4-quarter high. This indicates a decreased efficiency plus a lower proportion of revenues is reaching the bottom line, net income. The chart average OER, since QE July 2009, is 14.72%.



HP Reports FY Third Quarter 2011 Results and Initiates Company Transition

* Third quarter net revenue of $31.2 billion, up 1% from the prior year quarter and down 2% when adjusted for the effects of currency
* Third quarter GAAP diluted earnings per share up 24% with non-GAAP diluted earnings per share up 2% and cash flow from operations of $3.2 billion
* Revising full year FY11 revenue estimates to $127.2 billion to $127.6 billion
* Revising full year FY11 GAAP diluted earnings per share outlook down to between $3.59 and $3.70 and non-GAAP diluted earnings per share outlook down to between $4.82 and $4.86
* Exploring strategic alternatives for Personal Systems Group; shutting down operations for webOS devices and exploring strategic alternatives for webOS software
* Offer to acquire Autonomy, a global leader in infrastructure software for the enterprise, to accelerate expansion in rapidly growing enterprise information management market

PALO ALTO, Calif., Aug 18, 2011 (BUSINESS WIRE) -- HP (NYSE:HPQ) today announced financial results for its third fiscal quarter ended July 31, 2011, as well as the commencement of a company transformation described in detail in separate press releases issued today.

HP unveiled the details of a plan to accelerate the strategy introduced in March. The plan introduced today will:
* Move HP into higher value, higher margin growth categories
* Sharpen HP's focus on its strategic priorities of cloud, solutions and software with an emphasis on enterprise, commercial and government markets
* Increase investment in innovation to drive differentiation

As part of the transformation, HP announced that its board of directors has authorized the exploration of strategic alternatives for the company's Personal Systems Group. HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction.

HP will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. The devices have not met internal milestones and financial targets. HP will continue to explore options to optimize the value of webOS software going forward.

In addition, HP announced the terms of a recommended transaction for all of the outstanding shares of Autonomy Corporation plc for £25.50 ($42.11) per share in cash. Autonomy's software powers a full spectrum of mission-critical enterprise applications, including pan-enterprise search, customer interaction solutions, information governance, end-to-end eDiscovery, records management, archiving, business process management, web content management, web optimization, rich media management and video and audio analysis. The addition of Autonomy will accelerate HP's ability to deliver on its strategy to offer cloud-based solutions and software that best addresses the changing needs of businesses.

"We're focused on improving performance across the business," said Léo Apotheker, HP president and chief executive officer. "HP is taking bold, transformative steps to position the company as a leader in the evolving information economy. Today's announced plan will allow HP to drive creation of long-term shareholder value through a focus on fewer fronts, thereby improving its ability to execute, invest in innovation and drive a higher-margin business mix."

For the quarter, net revenue of $31.2 billion was up 1% from the prior-year period as reported and down 2% when adjusted for the effects of currency. GAAP diluted earnings per share (EPS) was $0.93, up 24% from $0.75 in the prior-year period. Non-GAAP diluted EPS was $1.10, up 2% from $1.08 in the prior-year period. Non-GAAP financial information excludes after-tax costs of approximately $0.17 per share and $0.33 per share in the third 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.

"Our outlook reflects the challenges that we face across our businesses," said Cathie Lesjak, HP executive vice president and chief financial officer. "Dealing with these challenges will take time, but HP will navigate through the transformation to become a more focused, streamlined company."


About HP

HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world's largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. More information about HP is available at http://www.hp.com/.


About Autonomy Corporation

Autonomy Corporation plc (LSE: AU. or AU.L), a global leader in infrastructure software for the enterprise, spearheads the Meaning Based Computing movement. IDC recently recognized Autonomy as having the largest market share and fastest growth in the worldwide search and discovery market. Autonomy’s technology allows computers to harness the full richness of human information, forming a conceptual and contextual understanding of any piece of electronic data, including unstructured information, such as text, email, web pages, voice, or video. Autonomy’s software powers the full spectrum of mission-critical enterprise applications including pan-enterprise search, customer interaction solutions, information governance, end-to-end eDiscovery, records management, archiving, business process management, web content management, web optimization, rich media management and video and audio analysis.

Autonomy’s customer base is comprised of more than 25,000 global companies, law firms and federal agencies including: AOL, BAE Systems, BBC, Bloomberg, Boeing, Citigroup, Coca Cola, Daimler AG, Deutsche Bank, DLA Piper, Ericsson, FedEx, Ford, GlaxoSmithKline, Lloyds TSB, NASA, Nestlé, the New York Stock Exchange, Reuters, Shell, Tesco, T-Mobile, the U.S. Department of Energy, the U.S. Department of Homeland Security and the U.S. Securities and Exchange Commission. More than 400 companies OEM Autonomy technology, including Symantec, Citrix, HP, Novell, Oracle, Sybase and TIBCO. The company has offices worldwide. Please visit www.autonomy.com to find out more.


More Charts and Analysis!

USA and Global economic charts
Apple (AAPL) financial performance and stock charts
Google (GOOG) financial performance and stock charts
Largest USA tech companies
Microsoft (MSFT) financial performance charts
Intel (INTC) financial performance charts
VMware (VMW) financial performance charts
SalesForce.com (CRM) financial performance charts
Rackspace (RAX) financial performance charts
Cisco (CSCO) financial performance charts
Oracle (ORCL) financial performance charts
HP (HPQ) financial performance charts
USA failed and problem banks
Largest USA banks
Federal Reserve statistical releases
JPMorgan Chase & Co. (JPM) financial performance charts
Citigroup (C) financial performance charts
Goldman Sachs (GS) financial performance charts
Wells Fargo (WFC) financial performance charts
Bank of America (BAC) financial performance charts
Morgan Stanley (MS) financial performance charts
S&P 500 (SPX) charts and review
China economic, internet, and technology news
Baidu (BIDU) financial performance and stock charts
Select news regarding the Universe, Earth, Humanity, Future


Visit Osprey Port News Network!
Apple, Google, Baidu, China, technology, financial system, stocks, markets, economy, science, environment, future


Follow Osprey Flyer (@OspreyFlyerOn Twitter!
Technology sector stocks and news plus analysis. Select USA & Global economic news.


^v^ ^v^ ^v^

Seeking Alpha