HP reports Q4 and 2011 full year results – lost $3.3 billion on webOS | webOS Nation
 
 

HP reports Q4 and 2011 full year results – lost $3.3 billion on webOS

by Derek Kessler Mon, 21 Nov 2011 5:42 pm EST

HP’s fourth quarter 2011 and full year 2011 results were released today, and the news from HP wasn't all that surprising. In the last quarter HP brought in $32.3 billion of revenue, netting them a profit of $2.4 billion. For the entire year, HP’s revenue clocked in at $127.4 billion, with $12.6 billion in profit. Better than nothing, but not huge.

$200 million of that revenue can be attributed to HP’s TouchPad fire sale. While $200 million is a good set of sales numbers for webOS, that revenue also came from tablets sold at below-cost. And that’s not all – HP clocked “after-tax costs” (i.e. money lost) due to webOS that amounted to $3.3 billion over the 2011 fiscal year.

What exactly HP’s planning to do with webOS, we still don’t know. Maybe we’ll hear more during today’s conference call (scheduled for 5PM Eastern) or not. We’ll see, though with $3.3 billion in losses related directly to webOS, they’ll have to commit many more billions if they want to continue with webOS.

HP Reports Fourth Quarter and Full Year 2011 Results

PALO ALTO, CA, Nov 21, 2011 (MARKETWIRE via COMTEX) --

HP (NYSE: HPQ)

-- Fiscal 2011 non-GAAP net revenue of $127.4 billion, non-GAAP diluted earnings per share of $4.88 and free cash flow of $9.1 billion grew 1%, 7% and 8%, respectively, over the prior year -- Fiscal 2011 GAAP net revenue of $127.2 billion, GAAP diluted earnings per share of $3.32 and cash flow from operations of $12.6 billion -- Fourth quarter non-GAAP net revenue of $32.3 billion, non-GAAP diluted earnings per share of $1.17 and free cash flow of $1.2 billion were down 3%, 12% and 43%, respectively, from the prior-year quarter -- Fourth quarter GAAP net revenue of $32.1 billion, GAAP diluted earnings per share of $0.12 and cash flow from operations of $2.4 billion

HP today announced financial results for its fourth quarter and full fiscal year ended Oct. 31, 2011.

"HP has a great opportunity to build on our strong hardware, software, and services franchises with leading market positions, customer relationships, and intellectual property," said Meg Whitman, HP president and chief executive officer. "We need to get back to the business fundamentals in fiscal 2012, including making prudent investments in the business and driving more consistent execution."

"While FY11 proved to be a challenging year, we grew non-GAAP EPS 7% and generated $12.6 billion in cash flow from operations," said Cathie Lesjak, HP executive vice president and chief financial officer. "We're remaining cautious heading into FY12 but are focused on delivering our earnings outlook and driving shareholder value."

Earnings highlights

------------------ ------------------------------ --------------------------                     Q4 FY11   Q4 FY10      Y/Y      FY11    FY10      Y/Y ------------------ ------------------------------ -------------------------- GAAP net revenue  ($B)              $   32.1  $   33.3        (3%) $127.2  $126.0         1% ------------------ ------------------------------ -------------------------- GAAP operating  margin                 2.5%      9.9% (7.4 pts)     7.6%    9.1% (1.5 pts) ------------------ ------------------------------ -------------------------- GAAP net earnings  ($B)              $    0.2  $    2.5       (91%) $  7.1  $  8.8       (19%) ------------------ ------------------------------ -------------------------- GAAP diluted EPS   $   0.12  $   1.10       (89%) $ 3.32  $ 3.69       (10%) ------------------ ------------------------------ -------------------------- Non-GAAP net  revenue ($)       $   32.3  $   33.3        (3%) $127.4  $126.0         1% ------------------ ------------------------------ -------------------------- Non-GAAP operating  margin                 9.7%     12.0% (2.3 pts)    10.8%   11.4% (0.6 pts) ------------------ ------------------------------ -------------------------- Non-GAAP net  earnings ($B)     $    2.4  $    3.1       (23%) $ 10.4  $ 10.9        (4%) ------------------ ------------------------------ -------------------------- Non-GAAP diluted  EPS               $   1.17  $   1.33       (12%) $ 4.88  $ 4.58         7% ------------------ ------------------------------ --------------------------  

Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below. Unless otherwise specified, all revenue amounts below are calculated on a GAAP basis.

Full year fiscal 2011 GAAP net revenue for the full fiscal year 2011 was $127.2 billion, up 1% compared with the prior year or down 1% when adjusted for the effects of currency. GAAP operating profit was $9.7 billion, and GAAP diluted earnings per share (EPS) was $3.32, down 10% from the prior year.

Non-GAAP net revenue for the full fiscal year 2011 was $127.4 billion, up 1% compared with the prior year or down 1% when adjusted for the effects of currency. Non-GAAP operating profit was $13.8 billion, and non-GAAP diluted EPS was $4.88, up 7% from the prior year.

Fiscal 2011 non-GAAP net revenue includes an additional $0.2 billion of revenue resulting from the exclusion of contra revenue associated with sales incentive programs implemented in the fourth quarter in connection with the wind down of HP's webOS device business, net of fourth quarter webOS device revenue. Non-GAAP earnings and operating profit information excludes after-tax costs of $3.3 billion, or $1.56 per diluted share, related to the wind down of HP's webOS device business, impairment of goodwill and purchased intangible assets, amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

Fourth fiscal quarter 2011 For the quarter, GAAP net revenue of $32.1 billion was down 3% from the prior-year period. Non-GAAP net revenue of $32.3 billion was down 3% from the prior-year period as reported and down 6% when adjusted for the effects of currency.

GAAP diluted EPS was $0.12, down 89% from the prior-year period. Non-GAAP diluted EPS was $1.17, down 12% from the prior-year period.

Fourth quarter non-GAAP net revenue includes an additional $0.2 billion of revenue resulting from the exclusion of contra revenue associated with sales incentive programs implemented in connection with the wind down of HP's webOS device business, net of webOS device revenue for the period. Fourth quarter non-GAAP earnings information excludes after-tax costs of $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, amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

Fourth fiscal quarter 2011 trends and regional performance In the Americas, fourth quarter GAAP net revenue was $14.5 billion, down 4% year over year and down 5% when adjusted for the effects of currency. Non-GAAP net revenue in the Americas was $14.6 billion, down 3% year over year and down 4% when adjusted for the effects of currency.

Europe, the Middle East and Africa GAAP revenue of $11.7 billion was down 6% year over year and down 10% when adjusted for the effects of currency. GAAP revenue in Asia Pacific was $6.0 billion, representing a 3% increase year over year, and down 4% when adjusted for the effects of currency.

GAAP revenue from outside of the United States in the fourth quarter accounted for 65% of total HP revenue. BRIC countries (Brazil, Russia, India and China) generated revenue of $3.8 billion, up 9% over the year-ago period, for 12% of total HP revenue.

Revenue in HP's commercial businesses declined 2% year over year. Revenue in HP's consumer businesses, within PSG and IPG, was collectively down 9% year over year.

Fourth fiscal quarter 2011 business group results

-- Services revenue of $9.3 billion grew 2% year over year with a 12.8% operating margin. Technology Services and Application Services revenue grew 3% and 2%, respectively, while IT Outsourcing revenue grew 1% and Business Process Outsourcing revenue declined 2%. -- Enterprise Servers, Storage and Networking (ESSN) revenue declined 4% year over year with a 13.0% operating margin. Networking revenue was up 5%, Industry Standard Servers revenue was down 4%, Business Critical Systems revenue was down 23%, and Storage revenue was up 4%. -- HP Software revenue grew 28% year over year with a 27.7% operating margin. HP Software revenue was driven by revenue growth in licenses and services of 33% and 36%, respectively. -- Personal Systems Group (PSG) revenue declined 2% year over year with a 5.7% operating margin. Commercial client revenue grew 5%, and Consumer client revenue declined 9%. Total units were up 2% with 5% growth in desktop units and 1% growth in notebook units. -- Imaging and Printing Group (IPG) revenue declined 10% year over year with a 12.8% operating margin. Commercial revenue was up 4% year over year with commercial printer hardware units up 5%. Consumer printer hardware revenue was down 8% year over year with an 8% decline in units. -- Financial Services revenue grew 18% year over year driven by double-digit growth in both lease volume and portfolio assets. The business delivered a 10.3% operating margin.

Asset management HP generated $2.4 billion in cash flow from operations in the fourth quarter. Inventory ended the quarter at $7.5 billion, with days of inventory up 4 days year over year to 27 days. Accounts receivable of $18.2 billion was up 1 day year over year to 51 days. Accounts payable ended the quarter at $14.8 billion, flat from the prior-year period at 52 days. HP's dividend payment of $0.12 per share in the fourth quarter resulted in cash usage of $239 million. HP also utilized $500 million of cash during the quarter to repurchase approximately 17 million shares of common stock in the open market. HP exited the quarter with $8.1 billion in gross cash.

Outlook For the first quarter of fiscal 2012, HP estimates non-GAAP diluted EPS in the range of $0.83 to $0.86, and GAAP diluted EPS in the range of $0.61 to $0.64.

First quarter fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.22 per share, related primarily to the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.

HP expects full year fiscal 2012 non-GAAP diluted EPS of at least $4.00 and GAAP diluted EPS of approximately $3.20.

Full year fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.80 per share, related primarily to the amortization and impairment of purchased intangibles, restructuring charges and acquisition-related charges.

In order to more effectively manage HP as one company and align its guidance policy with its long-term objective of delivering profitable growth, HP will only be providing a quarterly and annual earnings per share outlook. The company believes that earnings per share is a better indicator of successful execution across its various business levers. HP remains committed to high levels of disclosure and transparency, including general commentary on its expectations relating to future revenue and business segment performance, and will continue to provide detailed segment-level financial performance data for completed fiscal periods.

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 Q4 FY11 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2011q4webcast.

About HP HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world's largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. 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 net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow. 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 revenue, operating profit, operating margin, net earnings, diluted earnings per share, cash and cash equivalents or cash flow from operations prepared in accordance with GAAP.

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, currency exchange rates, the impact of acquisitions or other financial items; any statements of the plans, strategies and objectives of management for future operations, including the 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 the impact of macroeconomic and geopolitical trends and events; the competitive pressures faced by HP's businesses; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers and partners; the protection of HP's intellectual property assets, including intellectual property licensed from third parties; integration and other risks associated with business combination and investment transactions; the hiring and retention of key employees; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of 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, 2010 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 July 31, 2011. 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 Form 10-K for the fiscal year ended October 31, 2011. In particular, determining HP's actual tax balances and provisions as of October 31, 2011 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-K. HP assumes no obligation and does not intend to update these forward-looking statements.

Copyright 2011 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP shall not be liable for technical or editorial errors or omissions contained herein.

                   HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS                                 (Unaudited)                    (In millions except per share amounts)                                                Three months ended                                    ----------------------------------------                                     October 31,    July 31,     October 31,                                        2011          2011          2010                                    ------------  ------------  ------------  Net revenue                        $     32,122  $     31,189  $     33,278  Costs and Expenses:(a)   Cost of sales                          25,332        23,929        24,995   Research and development                  829           812           814   Selling, general and    administrative                         3,577         3,402         3,464   Amortization of purchased    intangible assets                        411           358           424   Restructuring charges                     179           150           235   Acquisition-related charges               114            18            51   Impairment of goodwill and    purchased intangible assets              885             -             -                                    ------------  ------------  ------------     Total costs and expenses             31,327        28,669        29,983                                    ------------  ------------  ------------  Earnings from operations                    795         2,520         3,295  Interest and other, net                    (401)         (121)          (81)                                    ------------  ------------  ------------  Earnings before taxes                       394         2,399         3,214  Provision for taxes                         155           473           676                                    ------------  ------------  ------------  Net earnings                       $        239  $      1,926  $      2,538                                    ============  ============  ============  Net earnings per share:   Basic                            $       0.12  $       0.94  $       1.13   Diluted                          $       0.12  $       0.93  $       1.10   Cash dividends declared per share  $          -  $       0.24  $          -  Weighted-average shares used to  compute net earnings per share:   Basic                                   1,989         2,054         2,249   Diluted                                 2,005         2,080         2,297   (a) In connection with organizational realignments implemented in the first     quarter of fiscal 2011, certain costs previously reported as Cost of     Sales have been reclassified as Selling, General and Administrative     expenses to better align those costs with the functional areas that     benefit from those expenditures.   

                   HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS                    (In millions except per share amounts)                                                        Twelve months ended                                                          October 31,                                                  --------------------------                                                      2011          2010                                                  ------------  ------------                                                   (Unaudited)  Net revenue                                      $    127,245  $    126,033  Costs and expenses:(a)   Cost of sales                                        97,529        95,956   Research and development                              3,254         2,959   Selling, general and administrative                  13,466        12,718   Amortization of purchased intangible assets           1,607         1,484   Restructuring charges                                   645         1,144   Acquisition-related charges                             182           293   Impairment of goodwill and purchased    intangible assets                                      885             -                                                  ------------  ------------     Total costs and expenses                          117,568       114,554                                                  ------------  ------------  Earnings from operations                                9,677        11,479  Interest and other, net                                  (695)         (505)                                                  ------------  ------------  Earnings before taxes                                   8,982        10,974  Provision for taxes                                     1,908         2,213                                                  ------------  ------------  Net earnings                                     $      7,074  $      8,761                                                  ============  ============  Net earnings per share:   Basic                                          $       3.38  $       3.78   Diluted                                        $       3.32  $       3.69   Cash dividends declared per share                $       0.40  $       0.32  Weighted-average shares used to compute net  earnings per share:   Basic                                                 2,094         2,319   Diluted                                               2,128         2,372   (a) In connection with organizational realignments implemented in the first     quarter of fiscal 2011, certain costs previously reported as Cost of     Sales have been reclassified as Selling, General and Administrative     expenses to better align those costs with the functional areas that     benefit from those expenditures.   

                   HEWLETT-PACKARD COMPANY AND SUBSIDIARIES   ADJUSTMENTS TO GAAP NET REVENUE, NET EARNINGS, EARNINGS FROM OPERATIONS,                   OPERATING MARGIN AND EARNINGS PER SHARE                                 (Unaudited)                    (In millions except per share amounts)                     Three               Three               Three                   months              months              months                   ended               ended               ended                  October   Diluted     July    Diluted   October   Diluted                    31,     earnings    31,     earnings    31,     earnings                    2011   per share    2011   per share    2010   per share                  -------  ---------  -------  ---------  -------  ---------  GAAP net revenue $32,122             $31,189             $33,278  Non GAAP  adjustment:   WebOS device    contra    revenue,    net(a)            142                   -                   -                  -------             -------             ------- Non GAAP net  revenue         $32,264             $31,189             $33,278                  =======             =======             =======   GAAP net  earnings        $   239  $    0.12  $ 1,926  $    0.93  $ 2,538  $    1.10  Non-GAAP  adjustments:   Amortization    of purchased    intangible    assets            411       0.20      358       0.17      424       0.19   Restructuring    charges           179       0.09      150       0.07      235       0.10   Acquisition-    related    charges in    earnings from    operations        114       0.06       18       0.01       51       0.02   Impairment of    goodwill and    purchased    intangible    assets(b)         885       0.44        -          -        -          -   Wind down of    the WebOS    device    business(c)       755       0.38        -          -        -          -   Acquisition-    related    charges in    interest and    other, net(d)     276       0.14        -          -        -          -   Adjustments    for taxes        (509)     (0.26)    (170)     (0.08)    (184)     (0.08)                  -------  ---------  -------  ---------  -------  --------- Non-GAAP net  earnings        $ 2,350  $    1.17  $ 2,282  $    1.10  $ 3,064  $    1.33                  =======  =========  =======  =========  =======  =========   GAAP earnings  from operations $   795             $ 2,520             $ 3,295  Non-GAAP  adjustments:   Amortization    of purchased    intangible    assets            411                 358                 424   Restructuring    charges           179                 150                 235   Acquisition-    related    charges in    earnings from    operations        114                  18                  51   Impairment of    goodwill and    purchased    intangible    assets(b)         885                   -                   -   Wind down of    the WebOS    device    business(c)       755                   -                   -                  -------             -------             ------- Non-GAAP  earnings from  operations      $ 3,139             $ 3,046             $ 4,005                  =======             =======             =======  GAAP operating  margin                2%                  8%                 10% Non-GAAP  adjustments           8%                  2%                  2%                  -------             -------             -------  Non-GAAP  operating  margin               10%                 10%                 12%                  =======             =======             =======   (a) Includes contra revenue primarily associated with sales incentive     programs to wind down the webOS device business, net of current quarter     webOS device revenue.  (b) Includes impairment charges to goodwill and purchased intangible assets     associated with the acquisition of Palm Inc. on July 1,2010 recorded as     a result of the decision announced on August 18,2011 to wind down the     webOS device business.  (c) Includes primarily expenses for supplier-related obligations and contra     revenue associated with sales incentive programs related to winding down     the webOS device business.  (d) Includes primarily the cost of the British pound options bought to limit     foreign exchange rate risk in connection with the Autonomy acquisition.   

                   HEWLETT-PACKARD COMPANY AND SUBSIDIARIES   ADJUSTMENTS TO GAAP NET REVENUE, NET EARNINGS, EARNINGS FROM OPERATIONS,                   OPERATING MARGIN AND EARNINGS PER SHARE                                 (Unaudited)                    (In millions except per share amounts)                               Twelve                    Twelve                             months                    months                             ended       Diluted       ended       Diluted                          October 31,    earnings   October 31,    earnings                              2011      per share       2010      per share                          -----------  -----------  -----------  -----------  GAAP net revenue         $   127,245               $   126,033  Non GAAP adjustment:   WebOS device contra    revenue, net(a)               142                         -                          -----------               ----------- Non GAAP net revenue     $   127,387               $   126,033                          ===========               ===========   GAAP net earnings        $     7,074  $      3.32  $     8,761  $      3.69  Non-GAAP adjustments:   Amortization of    purchased intangible    assets                      1,607         0.75        1,484         0.63   Restructuring charges          645         0.30        1,144         0.48   Acquisition-related    charges in earnings    from operations               182         0.09          293         0.12   Impairment of goodwill    and purchased    intangible assets(b)          885         0.42            -            -   Wind down of the WebOS    device business(c)            755         0.35            -            -   Acquisition-related    charges in interest    and other, net(d)             276         0.13            -            -   Adjustments for taxes       (1,045)       (0.48)        (816)       (0.34)                          -----------  -----------  -----------  ----------- Non-GAAP net earnings    $    10,379  $      4.88  $    10,866  $      4.58                          ===========  ===========  ===========  ===========   GAAP earnings from  operations              $     9,677               $    11,479  Non-GAAP adjustments:   Amortization of    purchased intangible    assets                      1,607                     1,484   Restructuring charges          645                     1,144   Acquisition-related    charges in earnings    from operations               182                       293   Impairment of goodwill    and purchased    intangible assets(b)          885                         -   Wind down of the WebOS    device business(c)            755                         -                          -----------               ----------- Non-GAAP earnings from  operations              $    13,751               $    14,400                          ===========               ===========  GAAP operating margin              8%                        9% Non-GAAP adjustments               3%                        2%                          -----------               -----------  Non-GAAP operating  margin                           11%                       11%                          ===========               ===========   (a) Includes contra revenue primarily associated with sales incentive     programs to wind down the webOS device business, net of current quarter     webOS device revenue.  (b) Includes impairment charges to goodwill and purchased intangible assets     associated with the acquisition of Palm Inc. on July 1,2010 recorded as     a result of the decision announced on August 18,2011 to wind down the     webOS device business.  (c) Includes primarily expenses for supplier-related obligations and contra     revenue associated with sales incentive programs related to winding down     the webOS device business.  (d) Includes primarily the cost of the British pound options bought to limit     foreign exchange rate risk in connection with the Autonomy acquisition.   

                   HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                     CONSOLIDATED CONDENSED BALANCE SHEETS                                 (In millions)                                                     October 31,   October 31,                                                       2011          2010                                                  ------------- -------------                                                   (unaudited) ASSETS  Current assets:   Cash and cash equivalents                      $       8,043 $      10,929   Accounts receivable               &

Source: HP