Personal Systems Group
Personal Systems Group (PSG) posted flat unit shipments in a challenging environment and attained the leading market position in PCs in every region. PSG revenue declined 19% to $8.2 billion. Notebook revenue for the quarter was down 13%, while Desktop revenue declined 24%. Commercial client revenue was down 22%, while Consumer client revenue decreased 16%. Operating profit was $374 million, or 4.6% of revenue, down from $544 million, or 5.4% of revenue, in the prior-year period.
Imaging and Printing Group
Imaging and Printing Group (IPG) revenue declined 23% to $5.9 billion. Supplies revenue was down 14% due in part to channel inventory realignment, while Commercial hardware revenue and Consumer hardware revenue declined 40% and 31%, respectively. Printer unit shipments decreased 27%, with Commercial printer hardware units down 36% and Consumer printer hardware units down 23%. Operating profit was $1.1 billion, or 18.2% of revenue, versus $1.2 billion, or 16.0% of revenue, in the prior-year period.
HP Financial Services
HP Financial Services (HPFS) reported revenue of $641 million, down 6% from the prior-year period. Financing volume increased 7%, and net portfolio assets declined 1%. Operating margin was 7.2% of revenue, up from 6.9% in the prior-year period.
Asset management
HP generated $5.0 billion in cash flow from operations for the second quarter. Inventory ended the quarter at $5.7 billion, down 7 days. Accounts receivable of $14.7 billion was up 5 days. Accounts payable ended the quarter at $11.4 billion, down 6 days. HP’s dividend payment of $0.08 per share in the second quarter resulted in cash usage of $192 million. HP utilized $801 million of cash during the second quarter to repurchase approximately 24 million shares of common stock in the open market. HP exited the quarter with $13.0 billion in gross cash.
Outlook
HP expects third quarter FY09 revenue to be approximately flat to down 2 percent sequentially.
Third quarter FY09 non-GAAP diluted EPS is expected to be approximately $0.88 to $0.90. Third quarter FY09 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.22 to $0.24 per share, related primarily to the amortization of purchased intangibles and restructuring charges. On a GAAP basis, third quarter FY09 diluted EPS is expected to be approximately $0.64 to $0.68.
HP estimates full-year FY09 revenue will decline approximately 4 to 5 percent from the prior-year period.
Full year FY09 non-GAAP diluted EPS is expected to be approximately $3.76 to $3.88. FY09 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.72 to $0.74 per share, related primarily to the amortization of purchased intangibles and restructuring charges. On a GAAP basis, full year FY09 diluted EPS is expected to be approximately $3.02 to $3.16.
More information on HP’s quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website at www.hp.com/investor/home.
HP’s Q2 FY09 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q22009webcast.
About HP
HP, the world’s largest technology company, simplifies the technology experience for consumers and businesses with a portfolio that spans printing, personal computing, software, services and IT infrastructure. More information about HP is available at http://www.hp.com/.
Use of non-GAAP financial information
To supplement HP’s consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash. HP also provides forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP management compensates for those limitations, and the substantive reasons why HP management believes that these non-GAAP measures provide useful information to investors is included under “Use of Non-GAAP Financial Measures” after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for operating profit, operating margin, net earnings, diluted earnings per share, or cash and cash equivalents prepared in accordance with GAAP.
EDS acquisition
HP completed its acquisition of Electronic Data Services Corporation on August 26, 2008. Results of, and comparisons to, the three and six months ended April 30, 2008 do not include the results of operations of EDS for those prior periods.
Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, share repurchases, acquisition synergies, currency exchange rates or other financial items; any statements of the plans, strategies, and objectives of management for future operations, including execution of cost reduction programs and restructuring and integration plans; any statements concerning the expected development, performance or market share relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by HP and its suppliers, customers and partners; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of cost reduction programs and restructuring and integration plans; the possibility that the expected benefits of business combination transactions may not materialize as expected; the resolution of pending investigations, claims and disputes; and other risks that are described in HP’s Annual Report on Form 10-K for the fiscal year ended October 31, 2008 and HP’s other filings with the Securities and Exchange Commission, including HP’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2009. As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2009. In particular, determining HP’s actual tax balances and provisions as of April 30, 2009 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP’s Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.
