HP cuts outlook amid flat Q4 results
Hewlett-Packard delivered a fourth quarter that was better than expected, and allayed concerns about the company and whether it could stabilise the business amid uncertainty.
The company reported fourth-quarter earnings of US$239 million, or 12 cents per share, on earnings of US$32.1 billion. In the same quarter a year ago, HP reported earnings of US$2.5 billion, or US$1.10 per share, on revenue of US$33.3 billion. Non-GAAP earnings for the fourth quarter were US$1.17 per share. Wall Street was looking for earnings of US$1.13 per share on revenue of US$32.05 billion.
The non-GAAP figure for HP includes costs of US$2.1 billion, or US$1.05 per share, to wind down the company's webOS business and restructure, amid other things. HP said: "Fourth-quarter non-GAAP earnings information excludes after-tax costs of US$2.1 billion, or $1.05 per diluted share, related to the wind down of HP's webOS device business, impairment of goodwill and purchased intangible assets, amortisation of purchased intangible assets, restructuring charges and acquisition-related charges." Simply put, HP is still struggling, but has gotten off the mat.
The webOS shutdown included the following charges:
- A charge to operating income of US$788 million associated with the wind down of the webOS device business: this charge included a net revenue reduction of US$142 million related to the sales-incentive programs, US$548 million in cost of sales due to supplier-related obligations and inventory reserves and US$98 million in operating expenses and restructuring charges
- HP took an impairment expense of US$885 million against the carrying value of goodwill, and purchased intangible assets related to the acquisition of Palm.
HP CEO Meg Whitman on her earnings call debut said:
We need to get back to doing what we do really well, being the reliable, trusted partner with whom our customers want to work, and delivering the reliable, consistent results that all of you can count on.
For fiscal 2011, HP reported earnings of US$7.1 billion, or US$3.32 per share, on revenue of US$127.2 billion, up 1 per cent from a year ago.
As for the outlook, HP projected non-GAAP earnings of 83 cents per share to 86 cents per share for the fiscal first quarter. Wall Street was looking for earnings of US$1.11 per share. For fiscal 2012, HP projected non-GAAP earnings of at least US$4 per share. Wall Street was looking for earnings of US$4.54 per share, but few analysts believed those figures.
Whitman said that HP needs "to get back to the business fundamentals in fiscal 2012." CFO Cathie Lesjak said that the company is "remaining cautious heading into FY12."
Digging into HP's results by business unit highlights a few worrisome trends. For starters, HP's enterprise server, storage and networking unit is sucking wind as both operating earnings and revenue fell.
(Credit: HP)
Imaging and printing operating income in the fourth quarter was US$808 million, down from US$1.22 billion a year ago. HP's printing business is a smaller cash cow than it used to be. In fact, ink-supply revenue was down by 14 per cent in the fourth quarter.
(Credit: HP)
Meanwhile, HP services sales were up, but earnings from operations fell to US$1.18 billion in the fourth quarter, down from US$1.5 billion a year ago.
Add it up, and HP's PC unit almost appears to be the least of its worries. HP's PC unit operating income was US$578 million, up from US$568 million a year ago. The trouble spots are highlighted below.
(Credit: HP)
By the numbers:
- America's revenue for the fourth quarter was US$14.5 billion, down 4 per cent from a year ago; Europe, Middle East and Africa revenue was US$11.7 billion, down 6 per cent from a year ago; Asia-Pacific revenue was US$6 billion, up 3 per cent from a year ago; and revenue from outside the US represents 65 per cent of HP's total sales
- HP's enterprise servers, storage and networking sales fell 4 per cent from a year ago; standard server revenue fell 4 per cent, and business-critical systems (Itanium) sales fell 23 per cent; storage revenue was up 4 per cent
- HP software revenue was up 28 per cent from a year ago
- The PC unit, which is staying at HP, held the fort, with a 2 per cent revenue decline; consumer PC sales fell 9 per cent
- Imaging and printing revenue fell 10 per cent in the fourth quarter
- Services revenue was US$9.3 billion, up 2 per cent from a year ago
- HP generated US$2.4 billion in cash flow in the fourth quarter
- Inventory was $7.5 billion, up four days from a year ago to 27 days.
Via ZDNet US