HP also today announced that the HP board of directors has declared a regular cash dividend of 14.52 cents per share on the company's common stock, which, as previously announced, reflects a 10% increase in amount compared to the previous quarterly dividend amount. The dividend, the third in HP's fiscal year 2013, is payable on July 3, 2013, to stockholders of record as of the close of business on June 12, 2013.
Second Quarter Fiscal 2013 Segment Results
- Personal Systems revenue was down 20% year over year with a 3.2% operating margin. Commercial revenue decreased 14%, and Consumer revenue declined 29%. Total units were down 21% with Desktops units down 18% and Notebooks units down 24%.
- Printing revenue declined 1% year over year with a strong operating margin of 15.8%. Total hardware units were down 11% year over year. Commercial hardware units were down 5% year over year, and Consumer hardware units were down 13% year over year.
- Enterprise Group revenue declined 10% year over year with a 15.9% operating margin. Networking revenue was up 1%, Industry Standard Servers revenue was down 12%, Business Critical Systems revenue was down 37%, Storage revenue was down 13% and Technology Services revenue was down 3% year over year.
- Enterprise Services revenue declined 8% year over year with a 2.6% operating margin. Application and Business Services revenue was down 10% year over year, and IT Outsourcing revenue declined 6% year over year.
- Software revenue was down 3% year over year with a 19.1% operating margin. Support revenue was up 12% while license revenue was down 23% and services revenue was down 5% year over year.
- HP Financial Services revenue was down 9% year over year with a 3% decrease in net portfolio assets and a 24% decrease in financing volume. The business delivered an operating margin of 11.0%.
More information on HP's 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 FY13 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2013Q2webcast.
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 operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash, free cash flow, net debt and operating company net debt. 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 or elsewhere in the materials accompanying this news release. 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, cash and cash equivalents, cash flow from operations or total company debt 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, earnings per share, tax provisions, cash flows, benefit obligations, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of restructuring plans and any resulting cost savings or revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance 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 need to address the many challenges facing HP's businesses; the competitive pressures faced by HP's businesses; risks associated with executing HP's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP's products and services effectively; the protection of HP's intellectual property assets, including intellectual property licensed from third parties; risks associated with HP's international operations; 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 hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the execution, timing and results of restructuring plans, including estimates and assumptions related to the cost and the anticipated benefits of implementing those plans; 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, 2012 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, 2013. 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-Q for the fiscal quarter ended April 30, 2013. In particular, determining HP's actual tax balances and provisions as of April 30, 2013 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.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Three months ended
-----------------------------------
April 30, January 31, April 30,
2013 2013 2012
---------- ----------- ----------
Net revenue $ 27,582 $ 28,359 $ 30,693
Costs and expenses:
Cost of sales 21,055 22,029 23,541
Research and development 815 794 850
Selling, general and administrative 3,342 3,300 3,540
Amortization of purchased intangible
assets 350 350 470
Restructuring charges 408 130 53
Acquisition-related charges 11 4 17
---------- ----------- ----------
Total costs and expenses 25,981 26,607 28,471
---------- ----------- ----------
Earnings from operations 1,601 1,752 2,222
Interest and other, net (193) (179) (243)
---------- ----------- ----------
Earnings before taxes 1,408 1,573 1,979
Provision for taxes (331) (341) (386)
---------- ----------- ----------
Net earnings $ 1,077 $ 1,232 $ 1,593
========== =========== ==========
Net earnings per share:
Basic $ 0.56 $ 0.63 $ 0.80
Diluted $ 0.55 $ 0.63 $ 0.80
Cash dividends declared per share $ - $ 0.26 $ -
Weighted-average shares used to compute
net earnings per share:
Basic 1,935 1,953 1,979
Diluted 1,947 1,956 1,987
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Six months ended
April 30,
--------------------------
2013 2012
------------ ------------
Net revenue $ 55,941 $ 60,729
Costs and expenses:
Cost of sales 43,084 46,854
Research and development 1,609 1,636
Selling, general and administrative 6,642 6,907
Amortization of purchased intangible assets 700 936
Restructuring charges 538 93
Acquisition-related charges 15 39
------------ ------------
Total costs and expenses 52,588 56,465
------------ ------------
Earnings from operations 3,353 4,264
Interest and other, net (372) (464)
------------ ------------
Earnings before taxes 2,981 3,800
Provision for taxes (672) (739)
------------ ------------
Net earnings $ 2,309 $ 3,061
============ ============
Net earnings per share:
Basic $ 1.19 $ 1.55
Diluted $ 1.18 $ 1.53
Cash dividends declared per share $ 0.26 $ 0.24
Weighted-average shares used to compute net
earnings per share:
Basic 1,944 1,980
Diluted 1,952 1,995
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Three Three Three
months Diluted months Diluted months Diluted
ended earnings ended earnings ended earnings
April per January per April per
30, 2013 share 31, 2013 share 30, 2012 share
-------- -------- -------- -------- -------- --------
GAAP net
earnings $ 1,077 $ 0.55 $ 1,232 $ 0.63 $ 1,593 $ 0.80
Non-GAAP
adjustments:
Amortization
of purchased
intangible
assets 350 0.17 350 0.18 470 0.23
Restructuring
charges 408 0.21 130 0.07 53 0.03
Acquisition-
related
charges 11 0.01 4 - 17 0.01
Wind down of
the webOS
device
business(a) - - - - (36) (0.02)
Adjustments
for taxes (148) (0.07) (111) (0.06) (148) (0.07)
-------- -------- -------- -------- -------- --------
Non-GAAP net
earnings $ 1,698 $ 0.87 $ 1,605 $ 0.82 $ 1,949 $ 0.98
======== ======== ======== ======== ======== ========
GAAP earnings
from operations $ 1,601 $ 1,752 $ 2,222
Non-GAAP
adjustments:
Amortization
of purchased
intangible
assets 350 350 470
Restructuring
charges 408 130 53
Acquisition-
related
charges 11 4 17
Wind down of
the webOS
device
business(a) - - (36)
-------- -------- --------
Non-GAAP
earnings from
operations $ 2,370 $ 2,236 $ 2,726
======== ======== ========
GAAP operating
margin 6% 6% 7%
Non-GAAP
adjustments 3% 2% 2%
-------- -------- --------
Non-GAAP
operating
margin 9% 8% 9%
======== ======== ========
(a) For the period ended April 30, 2012, primarily includes adjustments to
expenses for supplier-related obligations related to winding down the
webOS device business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Six Six
months months
ended Diluted ended Diluted
April 30, earnings April 30, earnings
2013 per share 2012 per share
--------- --------- --------- ---------
GAAP net earnings $ 2,309 $ 1.18 $ 3,061 $ 1.53
Non-GAAP adjustments:
Amortization of purchased
intangible assets 700 0.35 936 0.47
Restructuring charges 538 0.28 93 0.05
Acquisition-related charges 15 0.01 39 0.02
Wind down of the webOS device
business(a) - - (36) (0.02)
Adjustments for taxes (259) (0.13) (312) (0.15)
--------- --------- --------- ---------
Non-GAAP net earnings $ 3,303 $ 1.69 $ 3,781 $ 1.90
========= ========= ========= =========
GAAP earnings from operations $ 3,353 $ 4,264
Non-GAAP adjustments:
Amortization of purchased
intangible assets 700 936
Restructuring charges 538 93
Acquisition-related charges 15 39
Wind down of the webOS device
business(a) - (36)
--------- ---------
Non-GAAP earnings from
operations $ 4,606 $ 5,296
========= =========
GAAP operating margin 6% 7%
Non-GAAP adjustments 2% 2%
--------- ---------
Non-GAAP operating margin 8% 9%
========= =========
(a) For the period ended April 30, 2012, primarily includes adjustments to
expenses for supplier-related obligations related to winding down the
webOS device business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
April 30, October 31,
2013 2012
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 13,240 $ 11,301
Accounts receivable 14,606 16,407
Financing receivables 3,212 3,252
Inventory 5,999 6,317
Other current assets 12,514 13,360
------------- -------------
Total current assets 49,571 50,637
------------- -------------
Property, plant and equipment 11,476 11,954
Long-term financing receivables and other assets 10,205 10,593
Goodwill and purchased intangible assets 35,002 35,584
------------- -------------
Total assets $ 106,254 $ 108,768
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 6,928 $ 6,647
Accounts payable 12,313 13,350
Employee compensation and benefits 3,836 4,058
Taxes on earnings 1,015 846
Deferred revenue 6,757 7,494
Other accrued liabilities 13,809 14,271
------------- -------------
Total current liabilities 44,658 46,666
------------- -------------
Long-term debt 19,863 21,789
Other liabilities 17,801 17,480
Stockholders' equity:
HP stockholders' equity 23,533 22,436
Non-controlling interests 399 397
------------- -------------
Total stockholders' equity 23,932 22,833
------------- -------------
Total liabilities and stockholders' equity $ 106,254 $ 108,768
============= =============
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months Six months
ended ended
April 30, April 30,
2013 2013
------------ ------------
Cash flows from operating activities:
Net earnings $ 1,077 $ 2,309
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,170 2,333
Impairment of goodwill and purchased
intangible assets
Stock-based compensation expense 107 291
Provision for bad debt and inventory 93 217
Restructuring charges 408 538
Deferred taxes on earnings (28) 472
Excess tax benefit from stock-based
compensation - -
Other, net 59 226
Changes in operating assets and liabilities:
Accounts and financing receivables (98) 2,148
Inventory 289 140
Accounts payable 640 (1,050)
Taxes on earnings (3) (426)
Restructuring (165) (402)
Other assets and liabilities 7 (678)
------------ ------------
Net cash provided by operating
activities 3,556 6,118
------------ ------------
Cash flows from investing activities:
Investment in property, plant and equipment (767) (1,400)
Proceeds from sale of property, plant and
equipment 147 274
Purchases of available-for-sale securities
and other investments (198) (497)
Maturities and sales of available-for-sale
securities and other investments 431 592
Payments made in connection with business
acquisitions, net of cash acquired (167) (167)
------------ ------------
Net cash used in investing activities (554) (1,198)
------------ ------------
Cash flows from financing activities:
Repayment of commercial paper and notes
payable, net (28) (133)
Issuance of debt 154 199
Payment of debt (1,554) (1,668)
Issuance of common stock under employee
stock plans 157 212
Repurchase of common stock (797) (1,050)
Excess tax benefit from stock-based
compensation - -
Cash dividends paid (283) (541)
------------ ------------
Net cash used in financing activities (2,351) (2,981)
------------ ------------
Increase in cash and cash equivalents 651 1,939
Cash and cash equivalents at beginning of period 12,589 11,301
------------ ------------
Cash and cash equivalents at end of period $ 13,240 $ 13,240
============ ============
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Three months ended
-----------------------------------
April 30, January 31, April 30,
2013 2013 2012
---------- ----------- ----------
Net revenue:(a)
Personal Systems $ 7,584 $ 8,204 $ 9,470
Printing 6,081 5,926 6,132
---------- ----------- ----------
Total Printing and Personal Systems
Group(b) 13,665 14,130 15,602
Enterprise Group 6,819 6,984 7,546
Enterprise Services 5,999 5,919 6,489
Software 941 926 970
HP Financial Services 881 957 968
Corporate Investments 10 4 7
---------- ----------- ----------
Total segments 28,315 28,920 31,582
Elimination of intersegment net
revenue and other (733) (561) (889)
---------- ----------- ----------
Total HP consolidated net revenue $ 27,582 $ 28,359 $ 30,693
========== =========== ==========
Earnings before taxes:(a)
Personal Systems $ 239 $ 223 $ 516
Printing 958 953 808
---------- ----------- ----------
Total Printing and Personal Systems
Group(b) 1,197 1,176 1,324
Enterprise Group 1,082 1,084 1,352
Enterprise Services 156 76 237
Software 180 157 172
HP Financial Services 97 101 96
Corporate Investments (56) (65) (48)
---------- ----------- ----------
Total segment earnings from
operations 2,656 2,529 3,133
Corporate and unallocated costs and
eliminations (179) (109) (203)
Unallocated costs related to stock-
based compensation expense (107) (184) (168)
Amortization of purchased intangible
assets (350) (350) (470)
Restructuring charges (408) (130) (53)
Acquisition-related charges (11) (4) (17)
Interest and other, net (193) (179) (243)
---------- ----------- ----------
Total HP consolidated earnings
before taxes $ 1,408 $ 1,573 $ 1,979
========== =========== ==========
(a) HP has implemented certain organizational realignments in the first
quarter of fiscal 2013. As a result of these realignments, HP has re-
evaluated its segment financial reporting structure and, effective in
the first quarter of fiscal 2013, created two new financial reporting
segments, the Enterprise Group segment and the Enterprise Services
segment, and eliminated two other financial reporting segments, the
Enterprise Servers, Storage and Networking ("ESSN") segment and the
Services segment. The Enterprise Group segment consists of the business
units within the former ESSN segment and most of the services offerings
of the Technology Services ("TS") business unit, which was previously a
part of the former Services segment. The Enterprise Services segment
consists of the Applications and Business Services ("ABS") and
Infrastructure Technology Outsourcing ("ITO") business units from the
former Services segment, along with the end-user workplace support
services business that was previously a part of the TS business unit.
Taking into account these changes, HP has the following seven financial
reporting segments: Personal Systems, Printing, the Enterprise Group,
Enterprise Services, Software, HP Financial Services and Corporate
Investments.
Also as a result of these realignments, the financial results of the
Personal Systems commercial products support business, which were
previously reported as part of the TS business unit, will now be
reported as part of the Other business unit within the Personal Systems
segment, and the financial results of the portion of the business
intelligence services business that had continued to be reported as part
of the Corporate Investments segment following the implementation of
prior realignment actions will now be reported as part of the ABS
business unit. In addition, the end-user workplace support services
business, which, as noted above, was previously a part of the TS
business unit and will now become a part of the Enterprise Services
segment, will be reported as part of the ITO business unit within that
segment.
To provide improved visibility and comparability, HP has reflected these
changes to its reporting structure in prior financial reporting periods
on an as-if basis, which has resulted in the transfer of revenue and
operating profit among the Personal Systems, the Enterprise Group,
Enterprise Services and Corporate Investments segments. These changes
had no impact on the previously reported financial results for the
Printing, Software or HP Financial Services segments. In addition, none
of these changes impacted HP's previously reported consolidated net
revenue, earnings from operations, net earnings or net earnings per
share.
(b) The Personal Systems segment and the Printing segment are structured
beneath a broader Printing and Personal Systems Group ("PPS"). While PPS
is not a financial reporting segment, HP provides financial data
aggregating the segments within it in order to provide a supplementary
view of its business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Six months ended
April 30,
--------------------------
2013 2012
------------ ------------
Net revenue:(a)
Personal Systems $ 15,788 $ 18,362
Printing 12,007 12,390
------------ ------------
Total Printing and Personal Systems Group(b) 27,795 30,752
Enterprise Group 13,803 14,828
Enterprise Services 11,918 12,860
Software 1,867 1,916
HP Financial Services 1,838 1,918
Corporate Investments 14 37
------------ ------------
Total Segments 57,235 62,311
Elimination of intersegment net revenue and
other (1,294) (1,582)
------------ ------------
Total HP consolidated net revenue $ 55,941 $ 60,729
============ ============
Earnings before taxes:(a)
Personal Systems $ 462 $ 975
Printing 1,911 1,569
------------ ------------
Total Printing and Personal Systems Group(b) 2,373 2,544
Enterprise Group 2,166 2,681
Enterprise Services 232 382
Software 337 334
HP Financial Services 198 187
Corporate Investments (121) (98)
------------ ------------
Total segment earnings from operations 5,185 6,030
Corporate and unallocated costs and
eliminations (288) (356)
Unallocated costs related to stock-based
compensation expense (291) (342)
Amortization of purchased intangible assets (700) (936)
Restructuring charges (538) (93)
Acquisition-related charges (15) (39)
Interest and other, net (372) (464)
------------ ------------
Total HP consolidated earnings before
taxes $ 2,981 $ 3,800
============ ============
(a) HP has implemented certain organizational realignments in the first
quarter of fiscal 2013. As a result of these realignments, HP has re-
evaluated its segment financial reporting structure and, effective in
the first quarter of fiscal 2013, created two new financial reporting
segments, the Enterprise Group segment and the Enterprise Services
segment, and eliminated two other financial reporting segments, the
Enterprise Servers, Storage and Networking ("ESSN") segment and the
Services segment. The Enterprise Group segment consists of the business
units within the former ESSN segment and most of the services offerings
of the Technology Services ("TS") business unit, which was previously a
part of the former Services segment. The Enterprise Services segment
consists of the Applications and Business Services ("ABS") and
Infrastructure Technology Outsourcing ("ITO") business units from the
former Services segment, along with the end-user workplace support
services business that was previously a part of the TS business unit.
Taking into account these changes, HP has the following seven financial
reporting segments: Personal Systems, Printing, the Enterprise Group,
Enterprise Services, Software, HP Financial Services and Corporate
Investments.
Also as a result of these realignments, the financial results of the
Personal Systems commercial products support business, which were
previously reported as part of the TS business unit, will now be
reported as part of the Other business unit within the Personal Systems
segment, and the financial results of the portion of the business
intelligence services business that had continued to be reported as part
of the Corporate Investments segment following the implementation of
prior realignment actions will now be reported as part of the ABS
business unit. In addition, the end-user workplace support services
business, which, as noted above, was previously a part of the TS
business unit and will now become a part of the Enterprise Services
segment, will be reported as part of the ITO business unit within that
segment.
To provide improved visibility and comparability, HP has reflected these
changes to its reporting structure in prior financial reporting periods
on an as-if basis, which has resulted in the transfer of revenue and
operating profit among the Personal Systems, the Enterprise Group,
Enterprise Services and Corporate Investments segments. These changes
had no impact on the previously reported financial results for the
Printing, Software or HP Financial Services segments. In addition, none
of these changes impacted HP's previously reported consolidated net
revenue, earnings from operations, net earnings or net earnings per
share.
(b) The Personal Systems segment and the Printing segment are structured
beneath a broader Printing and Personal Systems Group ("PPS"). While PPS
is not a financial reporting segment, HP provides financial data
aggregating the segments within it in order to provide a supplementary
view of its business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Growth rate
Three months ended (%)
------------------------------- ------------
April 30, January April 30,
2013 31, 2013 2012 Q/Q Y/Y
--------- --------- --------- ----- -----
Net revenue:(a)
Printing and Personal
Systems Group(b)
Personal Systems
Notebooks $ 3,718 $ 4,128 $ 4,900 (10%) (24%)
Desktops 3,103 3,321 3,827 (7%) (19%)
Workstations 521 535 537 (3%) (3%)
Other 242 220 206 10% 17%
--------- --------- ---------
Total Personal Systems 7,584 8,204 9,470 (8%) (20%)
--------- --------- ---------
Printing
Supplies 4,122 3,893 4,060 6% 2%
Commercial Hardware 1,398 1,354 1,479 3% (5%)
Consumer Hardware 561 679 593 (17%) (5%)
--------- --------- ---------
Total Printing 6,081 5,926 6,132 3% (1%)
--------- --------- ---------
Total Printing and
Personal Systems
Group 13,665 14,130 15,602 (3%) (12%)
--------- --------- ---------
Enterprise Group
Industry Standard Servers 2,806 2,994 3,186 (6%) (12%)
Technology Services 2,272 2,243 2,335 1% (3%)
Storage 857 833 990 3% (13%)
Networking 618 608 614 2% 1%
Business Critical Systems 266 306 421 (13%) (37%)
--------- --------- ---------
Total Enterprise Group 6,819 6,984 7,546 (2%) (10%)
--------- --------- ---------
Enterprise Services
Infrastructure Technology
Outsourcing 3,721 3,736 3,954 0% (6%)
Application and Business
Services 2,278 2,183 2,535 4% (10%)
--------- --------- ---------
Total Enterprise
Services 5,999 5,919 6,489 1% (8%)
--------- --------- ---------
Software 941 926 970 2% (3%)
--------- --------- ---------
HP Financial Services 881 957 968 (8%) (9%)
--------- --------- ---------
Corporate Investments 10 4 7 150% 43%
--------- --------- ---------
Total Segments 28,315 28,920 31,582 (2%) (10%)
--------- --------- ---------
Elimination of intersegment
net revenue and other (733) (561) (889) 31% (18%)
--------- --------- ---------
Total HP consolidated net
revenue $ 27,582 $ 28,359 $ 30,693 (3%) (10%)
========= ========= =========
(a) HP has implemented certain organizational realignments in the first
quarter of fiscal 2013. As a result of these realignments, HP has re-
evaluated its segment financial reporting structure and, effective in
the first quarter of fiscal 2013, created two new financial reporting
segments, the Enterprise Group segment and the Enterprise Services
segment, and eliminated two other financial reporting segments, the
Enterprise Servers, Storage and Networking ("ESSN") segment and the
Services segment. The Enterprise Group segment consists of the business
units within the former ESSN segment and most of the services offerings
of the Technology Services ("TS") business unit, which was previously a
part of the former Services segment. The Enterprise Services segment
consists of the Applications and Business Services ("ABS") and
Infrastructure Technology Outsourcing ("ITO") business units from the
former Services segment, along with the end-user workplace support
services business that was previously a part of the TS business unit.
Taking into account these changes, HP has the following seven financial
reporting segments: Personal Systems, Printing, the Enterprise Group,
Enterprise Services, Software, HP Financial Services and Corporate
Investments.
Also as a result of these realignments, the financial results of the
Personal Systems commercial products support business, which were
previously reported as part of the TS business unit, will now be
reported as part of the Other business unit within the Personal Systems
segment, and the financial results of the portion of the business
intelligence services business that had continued to be reported as part
of the Corporate Investments segment following the implementation of
prior realignment actions will now be reported as part of the ABS
business unit. In addition, the end-user workplace support services
business, which, as noted above, was previously a part of the TS
business unit and will now become a part of the Enterprise Services
segment, will be reported as part of the ITO business unit within that
segment.
To provide improved visibility and comparability, HP has reflected these
changes to its reporting structure in prior financial reporting periods
on an as-if basis, which has resulted in the transfer of revenue and
operating profit among the Personal Systems, the Enterprise Group,
Enterprise Services and Corporate Investments segments. These changes
had no impact on the previously reported financial results for the
Printing, Software or HP Financial Services segments. In addition, none
of these changes impacted HP's previously reported consolidated net
revenue, earnings from operations, net earnings or net earnings per
share.
(b) The Personal Systems segment and the Printing segment are structured
beneath a broader Printing and Personal Systems Group ("PPS"). While PPS
is not a financial reporting segment, HP provides financial data
aggregating the segments within it in order to provide a supplementary
view of its business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Six months ended
April 30,
--------------------------
2013 2012
------------ ------------
Net revenue:(a)
Printing and Personal Systems Group(b)
Personal Systems
Notebooks $ 7,846 $ 9,842
Desktops 6,424 7,033
Workstations 1,056 1,072
Other 462 415
------------ ------------
Total Personal Systems 15,788 18,362
------------ ------------
Printing
Supplies 8,015 8,139
Commercial Hardware 2,752 2,968
Consumer Hardware 1,240 1,283
------------ ------------
Total Printing 12,007 12,390
------------ ------------
Total Printing and Personal Systems Group 27,795 30,752
------------ ------------
Enterprise Group
Industry Standard Servers 5,800 6,258
Technology Services 4,515 4,599
Storage 1,690 1,945
Networking 1,226 1,200
Business Critical Systems 572 826
------------ ------------
Total Enterprise Group 13,803 14,828
------------ ------------
Enterprise Services
Infrastructure Technology Outsourcing 7,457 7,934
Application and Business Services 4,461 4,926
------------ ------------
Total Enterprise Services 11,918 12,860
------------ ------------
Software 1,867 1,916
------------ ------------
HP Financial Services 1,838 1,918
------------ ------------
Corporate Investments 14 37
------------ ------------
Total segments 57,235 62,311
------------ ------------
Elimination of intersegment net revenue and
other (1,294) (1,582)
------------ ------------
Total HP consolidated net revenue $ 55,941 $ 60,729
============ ============
(a) HP has implemented certain organizational realignments in the first
quarter of fiscal 2013. As a result of these realignments, HP has re-
evaluated its segment financial reporting structure and, effective in
the first quarter of fiscal 2013, created two new financial reporting
segments, the Enterprise Group segment and the Enterprise Services
segment, and eliminated two other financial reporting segments, the
Enterprise Servers, Storage and Networking ("ESSN") segment and the
Services segment. The Enterprise Group segment consists of the business
units within the former ESSN segment and most of the services offerings
of the Technology Services ("TS") business unit, which was previously a
part of the former Services segment. The Enterprise Services segment
consists of the Applications and Business Services ("ABS") and
Infrastructure Technology Outsourcing ("ITO") business units from the
former Services segment, along with the end-user workplace support
services business that was previously a part of the TS business unit.
Taking into account these changes, HP has the following seven financial
reporting segments: Personal Systems, Printing, the Enterprise Group,
Enterprise Services, Software, HP Financial Services and Corporate
Investments.
Also as a result of these realignments, the financial results of the
Personal Systems commercial products support business, which were
previously reported as part of the TS business unit, will now be
reported as part of the Other business unit within the Personal Systems
segment, and the financial results of the portion of the business
intelligence services business that had continued to be reported as part
of the Corporate Investments segment following the implementation of
prior realignment actions will now be reported as part of the ABS
business unit. In addition, the end-user workplace support services
business, which, as noted above, was previously a part of the TS
business unit and will now become a part of the Enterprise Services
segment, will be reported as part of the ITO business unit within that
segment.
To provide improved visibility and comparability, HP has reflected these
changes to its reporting structure in prior financial reporting periods
on an as-if basis, which has resulted in the transfer of revenue and
operating profit among the Personal Systems, the Enterprise Group,
Enterprise Services and Corporate Investments segments. These changes
had no impact on the previously reported financial results for the
Printing, Software or HP Financial Services segments. In addition, none
of these changes impacted HP's previously reported consolidated net
revenue, earnings from operations, net earnings or net earnings per
share.
(b) The Personal Systems segment and the Printing segment are structured
beneath a broader Printing and Personal Systems Group ("PPS"). While PPS
is not a financial reporting segment, HP provides financial data
aggregating the segments within it in order to provide a supplementary
view of its business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT NON-GAAP OPERATING MARGIN SUMMARY DATA
(Unaudited)
Three
months Change in Operating
ended Margin (pts)
--------- ----------------------
April 30,
2013 Q/Q Y/Y
--------- ---------- ----------
Non-GAAP operating margin:(a)
Personal Systems 3.2% 0.5 pts (2.2 pts)
Printing 15.8% (0.3 pts) 2.6 pts
Printing and Personal Systems
Group(b) 8.8% 0.5 pts 0.3 pts
Enterprise Group 15.9% 0.4 pts (2.0 pts)
Enterprise Services 2.6% 1.3 pts (1.1 pts)
Software 19.1% 2.1 pts 1.4 pts
HP Financial Services 11.0% 0.4 pts 1.1 pts
Corporate Investments (560.0%) NM NM
Total segments 9.4% 0.7 pts (0.4 pts)
Total HP consolidated non-GAAP
operating margin 8.6% 0.7 pts (0.3 pts)
(a) HP has implemented certain organizational realignments in the first
quarter of fiscal 2013. As a result of these realignments, HP has re-
evaluated its segment financial reporting structure and, effective in
the first quarter of fiscal 2013, created two new financial reporting
segments, the Enterprise Group segment and the Enterprise Services
segment, and eliminated two other financial reporting segments, the
Enterprise Servers, Storage and Networking ("ESSN") segment and the
Services segment. The Enterprise Group segment consists of the business
units within the former ESSN segment and most of the services offerings
of the Technology Services ("TS") business unit, which was previously a
part of the former Services segment. The Enterprise Services segment
consists of the Applications and Business Services ("ABS") and
Infrastructure Technology Outsourcing ("ITO") business units from the
former Services segment, along with the end-user workplace support
services business that was previously a part of the TS business unit.
Taking into account these changes, HP has the following seven financial
reporting segments: Personal Systems, Printing, the Enterprise Group,
Enterprise Services, Software, HP Financial Services and Corporate
Investments.
Also as a result of these realignments, the financial results of the
Personal Systems commercial products support business, which were
previously reported as part of the TS business unit, will now be
reported as part of the Other business unit within the Personal Systems
segment, and the financial results of the portion of the business
intelligence services business that had continued to be reported as part
of the Corporate Investments segment following the implementation of
prior realignment actions will now be reported as part of the ABS
business unit. In addition, the end-user workplace support services
business, which, as noted above, was previously a part of the TS
business unit and will now become a part of the Enterprise Services
segment, will be reported as part of the ITO business unit within that
segment.
To provide improved visibility and comparability, HP has reflected these
changes to its reporting structure in prior financial reporting periods
on an as-if basis, which has resulted in the transfer of revenue and
operating profit among the Personal Systems, the Enterprise Group,
Enterprise Services and Corporate Investments segments. These changes
had no impact on the previously reported financial results for the
Printing, Software or HP Financial Services segments. In addition, none
of these changes impacted HP's previously reported consolidated net
revenue, earnings from operations, net earnings or net earnings per
share.
(b) The Personal Systems segment and the Printing segment are structured
beneath a broader Printing and Personal Systems Group ("PPS"). While PPS
is not a financial reporting segment, HP provides financial data
aggregating the segments within it in order to provide a supplementary
view of its business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Three months ended
-----------------------------------
April 30, January 31, April 30,
2013 2013 2012
----------- ----------- -----------
Numerator:
GAAP net earnings $ 1,077 $ 1,232 $ 1,593
=========== =========== ===========
Non-GAAP net earnings $ 1,698 $ 1,605 $ 1,949
=========== =========== ===========
Denominator:
Weighted-average shares used to
compute basic net earnings per share 1,935 1,953 1,979
Dilutive effect of employee stock
plans 12 3 8
----------- ----------- -----------
Weighted-average shares used to
compute diluted net earnings per
share 1,947 1,956 1,987
=========== =========== ===========
GAAP net earnings per share:
Basic(a) $ 0.56 $ 0.63 $ 0.80
Diluted(c) $ 0.55 $ 0.63 $ 0.80
Non-GAAP net earnings per share:
Basic(b) $ 0.88 $ 0.82 $ 0.98
Diluted(c) $ 0.87 $ 0.82 $ 0.98
(a) GAAP basic earnings per share were calculated based on GAAP net earnings
and the weighted-average number of shares outstanding during the
reporting period.
(b) Non-GAAP basic earnings per share were calculated based on non-GAAP net
earnings and the weighted-average number of shares outstanding during
the reporting period.
(c) Diluted net earnings per share includes any dilutive effect of
outstanding stock options, performance-based restricted units,
restricted stock units and restricted stock.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Six months ended
April 30,
---------------------------
2013 2012
------------- -------------
Numerator:
GAAP net earnings $ 2,309 $ 3,061
============= =============
Non-GAAP net earnings $ 3,303 $ 3,781
============= =============
Denominator:
Weighted-average shares used to compute basic
net earnings per share and 1,944 1,980
Dilutive effect of employee stock plans 8 15
------------- -------------
Weighted-average shares used to compute
diluted net earnings per share 1,952 1,995
============= =============
GAAP net earnings per share:
Basic(a) $ 1.19 $ 1.55
Diluted(c) $ 1.18 $ 1.53
Non-GAAP net earnings per share:
Basic(b) $ 1.70 $ 1.91
Diluted(c) $ 1.69 $ 1.90
(a) GAAP basic earnings per share were calculated based on GAAP net earnings
and the weighted-average number of shares outstanding during the
reporting period.
(b) Non-GAAP basic earnings per share were calculated based on non-GAAP net
earnings and the weighted-average number of shares outstanding during
the reporting period.
(c) Diluted net earnings per share includes any dilutive effect of
outstanding stock options, performance-based restricted units,
restricted stock units and restricted stock.
