) reported third quarter 2012 earnings per share (EPS) of $1.00,
beating the Zacks Consensus Estimate by a penny. But revenue and
earnings declined considerably compared to the prior year
Shares slumped following the announcement, reflecting a lowered
fiscal 2012 outlook due to slowing PC market concerns and
macroeconomic uncertainty in Europe & China.
Revenues declined 5.0% year over year to $29.7 billion.
Region wise, revenue in the
Americas was $13.4 billion, down 5.0% on a year-over-year basis.
EMEA revenue declined 4.0% to $10.6 billion, while revenue from the
Asia Pacific revenue declined 7.0% to $5.7 billion. Growth in
Russia and Central & Eastern Europe was somewhat offset by the
declines in business volume in Western Europe. Asia Pacific Japan
(APJ) was down 6% in constant currency, largely driven by continued
weakness in China.
Enterprise Servers, Storage & Networking
reported revenue of $5.14 billion, down 3.8% from $5.40 billion in
the year-ago quarter. A decline in BCS and softness in the EMEA
market mainly affected the segment.
Personal Systems Group
revenue declined 10.0% to $8.60 billion. Total units shipped were
down 10.0% year over year as the company witnessed some weakness in
overall consumer demand and suffered softness across Asia Pacific
and the Americas. Category wise, commercial revenue was down 9% and
consumer revenue declined 12% year-over-year.
Imaging and Printing Group
revenue slipped 2.7% year over year to $6.0 billion. The company
has gained market share in hardware and is also witnessing the
benefits of shifting ink products into the commercial segment.
Apart from this, the company believes that consumer demand is
revenue remained flat with the year-ago quarter at $935.0 million.
Financing volume was down 2%, and net portfolio assets increased
Gross margin in the quarter stood at 23.1% compared with 23.4%
in the year-ago quarter. Gross margin was impacted by the
improvements in IPG and Software margins, but were offset to a
considerable extent by declines in PSG and Services.
Diluted GAAP loss per share was $4.49 compared with earnings per
share of 80 cents in the prior-year quarter. This loss can be
attributed to the write down in lieu of
Electronic Data Storage
(EDS). After adjusting for special items, non-GAAP net earnings per
share were $1.00 compared with $1.10 in the prior-year quarter.
Balance Sheet, Cash Flow
Hewlett-Packard generated $2.8 billion in cash from operations
versus $2.5 billion in the previous quarter. The company ended the
quarter with $9.5 billion in cash and cash equivalents versus $8.3
billion. The company exited the quarter with a long-term debt
balance of $24.0 billion, slightly up from $25.8 billion in the
The company projects fiscal 2012 non-GAAP diluted EPS between
$4.05 and $4.07. The current guidance was at the lower end of the
previous outlook. Moreover, HP anticipates fiscal 2012 GAAP loss
per share between $2.23 and $2.25.
Hewlett-Packard's third quarter 2012 earnings per share exceeded
the Zacks Consensus Estimate, but revenues declined compared with
the year-ago period. Results were negatively impacted by
macroeconomic factors, lower order renewal and low bookings.
However, we believe that the restructuring initiatives taken up by
the company is encouraging and should improve margins going
During the quarter the company took some major steps to focus on
strategic priorities, and is also taking innovative steps to manage
costs, drive growth, and also to improve the health of its balance
On the other hand, the printer business looks challenging, with
competitors such as
) regularly coming up with new products. In addition, growing
availability of low-cost refilling options for toners and
cartridges poses a threat for HP. Also, margins in the services
business are likely to remain weak this year and the macroeconomic
trends continue to work against it.
The company is a Zacks #3 Rank (Hold).
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