) third-quarter 2013 non-GAAP earnings per share of 86 cents not
only lagged the Zacks Consensus Estimate of 87 cents but were
also down 14.0% on a year-over-year basis. However, the earnings
came at the high point of management's guided range of 84 cents
to 87 cents.
Hewlett-Packard's revenues declined 8.0% from the year-ago
quarter to $27.2 billion and missed the Zacks Consensus Estimate
of $27.4 billion. The company witnessed a broad-based revenue
decline across all its business segments.
revenues slumped 11.0% year over year to $7.7 billion, primarily
due to a decline in volumes in the PC market and weak consumer
demand. Within this segment, Commercial revenues declined 3.0%
and Consumer revenues declined 22.0%. Total units sold were down
8.0% compared to the year-ago quarter, while Desktops units and
Notebook units were down 9.0% and 14.0%, respectively. The units
sold were affected by soft demand environment in all its
operating regions, especially EMEA.
revenues declined 4.0% on a year-over-year to $5.8 billion. The
company's commercial hardware revenues declined 3.0% from the
year-ago quarter due to unfavorable product mix. Consumer
hardware revenues remained flat on a year-over-year basis
primarily driven by higher Ink in the Office and Ink Advantage
Despite the revenue declines, weak Yen allowed the company to
ship more units. As a result, total hardware units increased 5.0%
year over year, while the Commercial hardware units and Consumer
hardware units were up 12.0% and 2.0% from the year-ago quarter,
Revenues from the
were down 9.0% from the year-ago quarter to $6.8 billion
primarily due to execution challenges and competitive pricing
across its segments. Apart from this, revenues from
Hewlett-Packard's Industry Standard Servers dropped 11.0%, while
Business Critical Systems revenues slumped 26.0% from the
year-ago quarter. Moreover, Storage revenues and Technology
Services revenues were down 10.0% and 7.0%, respectively, on a
year-over-year basis. However, Networking sales remained flat on
a year-over-year basis.
The Enterprise Group segment recorded several customer wins
during the quarter including Oriental DreamWorks, a joint venture
between China Media Capital and
), selected Hewlett-Packard as the technology partner.
revenues were down 9.0% year over year to $5.8 billion, primarily
due to lower IT spending in the U.S. and the U.K. Application and
Business Services revenues declined 11.0% from the year-ago
quarter while IT Outsourcing revenues was down 7.0%.
During the quarter, Enterprise Services segment recorded
several contract wins, including a $3.4 billion contract from
United States Department of the Navy spanning over five years.
revenues inched up 1.0% year over year to $982.0 million
primarily aided by cloud, security and big data. Support revenues
were up 4.0%, while license revenues remained flat on a
year-over-year basis. Professional services revenues were down
11.0% year over year but SaaS revenues were up 4%. Improved sales
execution and solid license conversions were responsible for the
HP Financial Services
revenues declined 6.0% year over year to $879.0 million primarily
due to volume declines in the Enterprise Services which more than
offset the robust direct business growth. Hewlett-Packard
recorded volume declines in the Financing while its net portfolio
of assets declined 4.0% year over year to $12.0 billion.
Hewlett-Packard's gross profit for the quarter declined 7.0%
from the year-ago quarter to $6.37 billion due to lower revenues.
However, favorable mix of software, printing and personal systems
provided some cushion. Gross margin was 23.4% in the quarter
versus 23.1% in the year-ago quarter.
The company reported non-GAAP operating expenses of $4.1
billion, which declined 4% year over year due to lower Research
& Development investments and benefits from restructuring
activities. However, as a percentage of revenues, operating
expenses expanded 80 basis points (bps) which impacted operating
Non-GAAP operating income declined 16.0% from the year-ago
quarter to $2.3 billion while margins declined 80 bps to 8.4%.
Non-GAAP earnings per share were $1.7 billion or 86 cents
compared with $2.0 billion or $1.00 in the prior-year
Balance Sheet and Cash Flow
The company ended the quarter with $13.3 billion in cash and
cash equivalents versus $13.2 billion in the previous quarter.
The company had a long-term debt balance of $17.1 billion, down
from $19.9 billion in the previous quarter.
Hewlett-Packard generated $2.67 billion in cash from
operations versus $3.56 billion in the previous quarter.
For the fourth quarter, the company expects soft consumer
demand in the PC industry to impact Personal systems. Moreover,
pricing pressures in the personal systems, printing and servers
are also expected to impact results.
Hewlett-Packard expects a tough year-on-year comparison of the
Software segment in the upcoming quarter owing to the contract
) in the year-ago period. However, improvement in execution and
customer demand for Hewlett-Packard's big data, security and
cloud offerings are expected to remain solid.
For fiscal 2013, Hewlett-Packard estimates non-GAAP earnings
per share in the range of $3.53 to $3.57 (previous estimate $3.50
The company also hinted at a muted revenue growth in fiscal
2014 due to macroeconomic challenges.
Hewlett-Packard is one of the world's largest computing and
technology companies Results were impacted by macroeconomic
factors and a massive decline in the PC business. Moreover, the
company did not provide encouraging guidance. However, changes in
management are expected to boost growth for the company.
Additionally, the company's tractions in the cloud, security
and big data segment are the positives, going forward. However,
continuing macroeconomic challenges, tepid IT spending and
International Business Machines
) and Accenture plc are the headwinds, going forward.
Hewlett-Packard has a Zacks Rank #2 (Buy).
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