) reported first quarter 2012 earnings per share (
) of 92 cents, beating the Zacks Consensus Estimate of 87 cents. In
the after market trade, the company's share price dipped 1.21% due
to lackluster revenues and weak sequential outlook.
Revenues declined 7.0% year over year to $30.0 billion. The
year-over-year decline in revenue can be attributed to the hard
disk drive shortages that impacted both
Personal Systems Group
Enterprise Servers Storage & Networking
Moreover, owing to the flooding in Thailand last year, supply of
hard disk drives across the industry declined 30% in the last
quarter of the calendar year. As a result of this shortage, the
company decided to prioritize profitability, product performance
and quality over shipment volume and market share. This primarily
led to the downside in revenues during the reported quarter.
Region wise, the Americas generated revenue of $13.2 billion,
down 9.0% year over year. Europe, the Middle East and Africa (EMEA)
registered revenues of $11.7 billion, down 4.0% year over
year. Revenues from the Asia Pacific also declined 10.0% year
over year to $5.2 billion.
Revenues from outside the United States in the reported quarter
accounted for 66.0% of the total revenue. BRIC countries (Brazil,
Russia, India and China) generated revenues of $3.1 billion, down
13.0% year over year and accounted for 10.0% of the total
Enterprise Servers, Storage & Networking
reported revenues of $5.0 billion, down 10.4% from $5.6 billion in
the year-ago quarter. Networking revenue remained flat, while
Industry Standard Servers revenue plunged 11.0%. Business Critical
Systems and Storage revenue were also down 27.0% and 6.0% year over
Personal Systems Group (PSG)
revenues were $8.9 billion, down 15.1% year over year. Total units
shipped in this segment plummeted 18.0% year over year. The
shipment for the quarter was impacted by the hard disk drive
Moreover, both commercial client revenue and consumer client
revenue declined 7.0% and 25.0% year over year, respectively.
Workstation revenue was flat year over year. Desktop revenue
declined 18.0%, and notebook revenue decreased 15.0% compared with
the year-ago quarter.
Imaging and Printing Group (
revenues were $6.3 billion, down 7.0% year over year. Commercial
hardware revenue dipped 5.0% on a year-over-year basis with
commercial printer falling 10.0%. Consumer hardware revenue was
down 15.0% year over year along with a 15.0% decline in printer
HP Financial Services (HPFS)
revenues were $950.0 million, up 14.9% year over year. This was
driven by an 8% increase in net portfolio assets and flat financing
Gross margin in the quarter stood at 22.4% compared with 24.5%
in the year-ago quarter. Gross margin remains impacted by the
strong yen, lower mix of ink supplies, competitive pricing for
hardware products and continued margin pressure in Services.
Diluted earnings per share on a GAAP basis was 73 cents in the
reported quarter compared with $1.17 in the prior-year quarter.
After adjusting for special items, non-GAAP net earnings per share
was 92 cents compared with $1.36 in the prior-year quarter.
Balance Sheet, Cash Flow & Stock Repurchase
Hewlett-Packard generated $1.2 billion in cash from operations
versus $2.4 billion in the previous quarter. The company ended the
quarter with $8.1 billion in cash and cash equivalents versus $8.0
billion in the previous quarter. The company exited the quarter
with a long-term debt balance of $25.5 billion, up from $22.5
billion in the previous quarter.
For the second quarter of fiscal 2012, HP estimates non-GAAP
diluted EPS in the range of 88 cents to 91 cents and GAAP diluted
EPS in the range of 68 cents to 71cents.
The company did not change its previously provided full year
fiscal 2012 outlook of non-GAAP diluted EPS of at least $4.00 and
GAAP diluted EPS of approximately $3.20.
Non-GAAP diluted EPS estimates for fiscal 2012 exclude after-tax
costs of approximately 80 cents per share, related primarily to the
amortization of purchased intangible assets, restructuring charges
and acquisition-related charges.
As expected, computing major Hewlett-Packard reported mediocre
first quarter results, with revenue and earnings declining
substantially on a year-over-year basis. However, reported earnings
surpassed our estimate. The company's margins declined due to
exchange rate fluctuations and a greater mix of low margin products
along with a competitive pricing for high margin products.
Further, the company's second quarter guidance of 90-91 cents
per share is lower than the Zacks Consensus Estimate of 95 cents.
Also, the consumer client PC sales fell 25.0% in the quarter, and
consumer printer sales were down 15.0%. Hence, the overall results
of the company suffered despite the earnings beat.
We believe that CEO Meg Whitman has a tough job on her hands,
especially as business growth of the company remains challenged due
to the worsening external environment, including dull demand from
Europe. Moreover, the company is implementing several strategies to
improve volume in 2012 in order to drive revenues.
The company has a Zacks#3 Rank, indicating a short-term Hold
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