Hewlett-Packard reported strong fiscal fourth quarter results Monday and raised its outlook for the first quarter and 2011 in the first financial results under new CEO Leo Apotheker.
The company reported earnings of $2.5 billion, or $1.10 a share , on revenue of $33.3 billion, up 8 percent from a year ago. Non-GAAP earnings were $1.33 a share. Wall Street was expecting earnings of $1.27 a share on revenue of $32.75 billion.
As for the outlook, HP projected first quarter revenue of $32.8 billion to $33 billion with non-GAAP earnings of $1.28 a share to $1.30 a share ($1.06 to $1.08 under GAAP). Wall Street was expecting earnings of $1.22 a share on revenue of $32.74 billion. For fiscal 2011, HP projected revenue between $132 billion to $133.5 billion with non-GAAP earnings of $5.16 a share to $5.26 a share ($4.42 to $4.52 under GAAP). Wall Street was expecting earnings of $5.11 a share on revenue of $132.4 billion.
The results indicate that HP has been able to execute amid distractions---notably the saga with the Oracle and SAP TomorrowNow trial and the hubbub over potentially calling Apotheker to testify. Oracle rested its case so can't call Apotheker now. Apotheker said that "a competitor" has tried to distract HP repeatedly, but was unsuccessful. HP "is as focused as ever on driving the business forward," said Apotheker.
In reference to the Oracle flap, HP's new CEO was also asked where he was physically at the moment. Apotheker quipped: "That's an odd question." He then noted that he was in HP's Palo Alto headquarters with a bunch of other people. "Would you like a picture?" he asked.
Apotheker said he has been meeting with employees all around the world---from California to China to Singapore and Europe. "It is clear that HP is winning in the market. We have strong momentum going into next year. Customers have also given me great feedback," he said.
Apotheker added that research and development outpaced revenue growth in the fourth quarter and that trend will continue. He added that he's looking forward "to spending more time digging into our technology." He was also asked about HP's strategy going forward. "It's a little bit early for me to talk about overall strategy," he said. "I need to spend more time meeting with customers and employees." Apotheker said he has been on the road, but initial expectations are as follows:
- HP will spend more on R&D.
- "We can drive a more unified user experience across the board," he said.
- More integrated systems on tap.
- HP is hiring more sales people.
- "We all feel that we can add a lot of value through software," said Apotheker. He was asked about growing software revenue as a percentage of revenue.
HP executives also added that public sector spending wasn't notable down or up because most of its state and local government contracts are annuity-based services deals. Cisco had said public sector spending was weak. However, HP saw consumer weakness just like Dell did. In response to a question about the macro environment, CFO Cathie Lesjak said the company has seen "uneven consumer performance across geographies and categories."
The line "uneven consumer performance" is certainly in the company's PR script. Lesjak used the same phrase twice to describe the weakness and Todd Bradley, EVP of the Personal Systems Group, used it once. Consumer, Lesjak said, represents about 25 percent of the total revenue but noted that the PC portfolio is diversified across consumer and commercial. While consumer has been soft, business customers have been refreshing their product lines. In the U.S., "Consumers are somewhat cautious about spending and are increasingly deal-driven," Bradley said. "As we look at the holiday season, we're very well positioned in the marketplace. We have an array of products at an array of price points and we'll participate on Black Friday with those products."
By the numbers:
- For fiscal 2010, HP reported earnings of $8.8 billion, or $3.69 a share, on revenue of $126 million.
- Enterprise storage and servers shined with revenue of $5.3 billion in the fourth quarter, up 25 percent from a year ago.
- HP's software revenue was up 1 percent to $974 million. Operating profit was $247 million.
- The personal systems group had revenue of $10.3 billion in the fourth quarter, up 4 percent from a year ago. Operating profit was $568 million. HP did say that consumer client revenue fell 10 percent and notebook sales were down 3 percent. Commercial revenue was up 20 percent.
- Services revenue was basically flat at $9 billion in the fourth quarter. Operating profit was $1.5 billion.
- Imaging and printing revenue was up 8 percent to $7 billion in the fourth quarter. Operating profit was $1.2 billion.
And the key slides: