SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 13, 1998
HEWLETT-PACKARD COMPANY
(Exact name of registrant as specified in its charter)
Delaware 001-04423 94-1081436
(State or other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
3000 Hanover Street, Palo Alto, California 94304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 857-1501
N/A
------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 5. Other Events.
1. In a release dated May 13, 1998, Hewlett-Packard Company
(NYSE:HWP) announced that its second fiscal quarter earnings would
be below expectations. The news release is attached as Exhibit 99.1.
2. In a release dated May 15, 1998 Hewlett-Packard Company (NYSE:HWP)
announced its financial results for the period ended April 30, 1998,
including an unaudited consolidated condensed balance sheet as of
April 30, 1998 and an unaudited consolidated condensed statement of
earnings for the period ended April 30, 1998. The news release is
attached as Exhibit 99.2.
Item. 7. Financial Statements and Exhibits.
Exhibit No. Description
99.1 News release dated May 13, 1998
99.2 News release dated May 15, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
HEWLETT-PACKARD COMPANY
Dated: May 20, 1998 By: /s/ S.T. Jack Brigham III
-------------------------
S.T. Jack Brigham III
Senior Vice President
Corporate Affairs
and General Counsel
Exhibit 99.1
[Logo of Hewlett-Packard Company appears here]
EDITORIAL CONTACTS:
Steve Beitler
(650) 857-2387
steve_beitler@hp.com
Rhea Feldman
(650) 857-3989
rhea_feldman@hp.com
HP COMMENTS ON SECOND-QUARTER PERFORMANCE
PALO ALTO, Calif., May 13, 1998 - Hewlett-Packard Company (NYSE:
HWP) today said that, based on preliminary results, earnings for the
1998 fiscal year's second quarter, which ended April 30, will be below
expectations. Final results will be announced Friday, May 15, at 5:00
a.m. Pacific Daylight Time.
"While we did achieve good revenue and order growth this quarter,
we are disappointed that our early calculations show earnings per share
coming in well short of expectations," said Lewis E. Platt, HP chairman,
president and chief executive officer.
The Company said that earnings are expected to be approximately
65 cents per share. The company earned 75 cents per share in the same
period last year.
HP said that the product mix, as well as pricing pressures in the
PC business, were significant factors in the company's results. HP also
said that economic weakness in Asia affected a number of its businesses
-- particularly measurement systems, whose products typically have
higher gross margins.
The company noted that the quarter's expected earnings include the
impact of previously announced printer-manufacturing consolidations in
North America, effects associated with the acquisition of Heartstream, Inc.
and certain other charges.
"We're pleased that our customers continue to respond enthusiastically
to our products," said Platt. "However, we clearly have more work to do
to translate our strong growth into acceptable profitability."
About HP
--------
Hewlett-Packard Company is a leading global provider of computing,
Internet and intranet solutions, services, communications products and
measurement solutions, all of which are recognized for excellence in
quality and support. HP has 123,300 employees and had revenue of $42.9
billion in its 1997 fiscal year.
Information about HP and its products can be found on the World Wide
Web at http://www.hp.com.
Current and historical financial information now is available at HP's
Financial Online site on the World Wide Web. Address: http://hp.com/go/
financials.
# # #
Exhibit 99.2
[Hewlett-Packard Company Logo appears here]
EDITORIAL CONTACTS:
Steve Beitler
(650) 857-2387
steve_beitler@hp.com
Rhea Feldman
(650) 857-3989
rhea_feldman@hp.com
HP REVENUE UP 16 PERCENT; EARNINGS DECLINE 13 PERCENT
PALO ALTO, Calif., May 15, 1998 Hewlett-Packard Company (NYSE:
HWP) today reported a 16 percent increase in net revenue, a 12 percent
increase in orders and a 13 percent decline in net earnings for the 1998
fiscal year's second quarter, which ended April 30.
Net earnings this quarter were $685 million, compared with $784
million in the second quarter last year. Earnings per share (EPS) on a
diluted basis(1) was 65 cents on approximately 1.08 billion shares of
common stock and common-stock equivalents outstanding. This compares
with diluted EPS of 75 cents on approximately 1.05 billion shares and
equivalents in the second quarter last year.
"While our solid revenue and order growth this quarter shows that
we're addressing real customer needs, our earnings performance fell well
short of expectations," said Lewis E. Platt, HP chairman, president and
chief executive officer. "Profitability was down compared to the
year-ago quarter because of pricing pressure in PCs, troubled Asian
economies and our unacceptable operating-expense growth. While some of
the factors are not unique to HP, we clearly need to improve our ability
to translate our leadership position in many markets into equally strong
results."
Business Summary
----------------
Net revenue for the quarter was $12.0 billion, compared with $10.3
billion in the year-ago quarter. Net revenue in the United States was
$5.3 billion, an increase of 20 percent compared with a year ago, while
revenue from outside the United States rose 14 percent to $6.7 billion.
In Europe, revenue totaled $4.1 billion, an increase of 19 percent. In
Asia Pacific, revenue grew 1 percent and was $1.9 billion. In Canada
and Latin America, combined revenue grew 24 percent and was $700
million. Currency effects reduced the company's reported revenue growth
of 16 percent by about 5 percentage points.
Orders for the quarter were $11.6 billion, compared with $10.4
billion in the same period last year. Orders in the United States rose
16 percent compared with the year-ago quarter and were $5.3 billion.
Orders from outside the United States increased 8 percent and were $6.3
billion.
Computer Business
-----------------
Net revenue in the computer business increased 18 percent over
last year's second quarter and totaled $10.0 billion. Orders in the
computer business rose 16 percent over the same quarter last year and
were $9.8 billion.
Computing Platforms
-------------------
In the PC business, revenue growth was strong. Revenue for HP
Pavilion home PCs more than doubled, and the company's palmtop PCs
achieved robust growth, driven by demand for new Windows(R) CE-based
products.
Revenue and orders for HP Kayak PC Workstation products -- which
are based on the Microsoft(R) Windows NT(R) operating system declined
in comparison with a very strong year-ago quarter and, in part, in
anticipation of new Pentium(R) II-based systems. Orders for UNIX(R)
system workstations also were down.
In the server business, HP NetServer systems achieved a solid
order increase, driven by demand at the low end. These servers regained
the No. 2 worldwide market-share position, according to IDC's preliminary
estimates for the quarter ending March 31, 1998.
For UNIX system servers, revenue growth was excellent, and order
growth was good. Declines in base-system prices were more than offset
by revenue from fully configured systems. There was excellent response
to the company's new high-end system, the HP 9000 V2250 Enterprise
Server. Midrange systems showed strong order growth in terms of units
but declined in terms of dollars. Enterprise storage products achieved
very good order growth this quarter.
Hardcopy Products
-----------------
HP's laser printer business achieved excellent revenue growth,
with strength across the product platform and in supplies. Growth was
driven by strong acceptance of new products, including the HP LaserJet
3100 all-in-one product and the recently introduced HP LaserJet 8000
family of high-end printers. Revenue growth also was strong for HP
Color LaserJet printers; the LaserJet 4000 printer; and the low-end,
LaserJet 6L printer.
The company's inkjet business posted strong overall revenue
growth, with an excellent increase in demand for supplies. There was
very favorable initial industry response to the HP 2000C Professional
Series color printer, which features a breakthrough ink-delivery system.
Market acceptance of the HP DeskJet 720 printer was excellent.
Services and Software
---------------------
Services and software achieved good overall revenue this quarter.
Customer support and financing services grew well, with particular
strength in multivendor support. New Internet software offerings are
receiving strong customer acceptance, while demand for HP OpenView
network- and system-management software remained excellent.
Information Storage
-------------------
Revenue and order growth in information storage was outstanding.
Orders more than tripled for the HP SureStore CD-Writer Plus drive.
Demand also was brisk for high-end digital audio tape (DAT) products.
Test and Measurement
--------------------
Revenue in test and measurement increased by 5 percent, while
orders decreased 10 percent. The test-and-measurement business was hurt
by economic conditions in Asia and their impact on capital investments
by major customers. Bright spots in this business included consulting
and services, oscilloscopes, as well as digital- and mixed-signal IC
test equipment.
Components, Medical and Chemical Analysis
-----------------------------------------
The components business posted a 16 percent revenue increase and
10 percent growth in orders. Revenue in medical products grew 9
percent, while orders declined by 1 percent. Chemical-analysis revenue
increased 11 percent, and orders declined by 4 percent.
Costs and Expenses
------------------
Cost of goods sold this quarter was 68.3 percent of revenue,
compared with 65.2 in the year-ago quarter and 66.3 percent in the first
quarter of fiscal 1998. "The increase was driven by intensifying pricing
pressures, a continuing shift to the low end in many product lines and
restructuring charges for manufacturing consolidation," said Robert P.
Wayman, HP executive vice president and chief financial officer.
"Without restructuring charges, our ratio for cost of goods sold would
have been 67.6 percent of revenue."
Operating expenses rose 18 percent compared with the same quarter
last year and were 24.5 percent of revenue. This compares with 24.1
percent in the second quarter of last year and 22.7 percent in the first
quarter of fiscal 1998.
"Expenses were affected by acquisitions and stock-price effects,
as well as investments to support important product introductions," said
Wayman. "Nonetheless, we're not where we need to be. Given the pressure
on gross margin and slowing in some of our businesses, we will
aggressively adjust our spending plans while we continue to execute
existing expense-management programs, such as consolidations."
Asset Management
----------------
Return on assets for the quarter was 9.3 percent, compared with
9.9 percent in the year-ago quarter and 9.6 percent in the prior
quarter. The decline was due to lower net earnings and increased cash
balances.
Inventory was 14.5 percent of revenue, compared with 15.7 percent
in the year-ago quarter and 16.0 percent in the first quarter of fiscal
1998.
"Although return on assets declined this quarter, we are pleased
with asset management overall," said Wayman. "We are making real
progress on inventory. Our supply-chain efforts, particularly in PCs,
have helped us achieve our lowest inventory-to-sales ratio in five
years."
As a percentage of net revenue, accounts receivable was 18.1
percent. This compares with 17.2 percent in the same quarter last year
and 18.9 percent in the first quarter of fiscal 1998. Net property,
plant and equipment was 13.9 percent of revenue, compared with 14.6
percent in the second quarter last year and 14.1 percent in the prior
quarter. The company's strong performance on asset management was a key
driver of excellent cash generation this quarter.
Six-month Review
----------------
For the six months ended April 30, net earnings declined 5 percent
to $1.6 billion, compared with $1.7 billion in the first half of fiscal
1997. Net earnings per share was $1.51, a 7 percent decline compared
with the $1.62 the company earned in last year's first half.
Net revenue increased 16 percent over the first half of last year
and totaled $23.9 billion. Net revenue in the United States was $10.6
billion, an increase of 21 percent over last year's first half, while
net revenue from outside the United States rose 12 percent to $13.3
billion.
Orders for the six-month period were $24.0 billion, an increase of
12 percent compared with the same period last year. U.S. orders were
$10.7 billion, an increase of 21 percent, while orders from outside the
United States grew 6 percent and totaled $13.3 billion.
Business Outlook
----------------
"While we're disappointed with this quarter's earnings, our solid
revenue and order growth tells us that our strategies and product
programs are on target," said Platt. "We're encouraged by revenue
growth in UNIX system servers, very strong demand for our home PCs, and
increased momentum in our printer and information-storage businesses.
"However, the pricing and competitive environment remains very
challenging, especially in PCs and printers. The situation in Asia is
still difficult and uncertain. We must make significant improvements on
operating-expense management and, at the same time, continue to sharpen
our focus on customers and accelerate the pace of new-business creation.
HP's people bring tremendous talent and energy to these challenges,
which we intend to address head-on."
About HP
--------
HP is the official information-technology hardware and maintenance
supplier to the 1998 World Cup soccer tournament.
Hewlett-Packard Company is a leading global provider of computing,
Internet and intranet solutions, services, communications products and
measurement solutions, all of which are recognized for excellence in
quality and support. HP has 125,300 employees and had revenue of $42.9
billion in its 1997 fiscal year.
Information about HP and its products can be found on the World
Wide Web at http://www.hp.com.
This news release contains forward-looking statements, based on
current expectations, that involve risks and uncertainties that could
cause HP's results to differ materially. In addition to the factors
discussed above, other risks include the timely development, production
and acceptance of new products and services and their feature sets; the
challenge of managing asset levels, including inventory; the flow of
products into third-party distribution channels; and the other risks
detailed from time to time in the company's Securities and Exchange
Commission reports, including, but not limited to, the Annual Report on
Form 10-K for the year ended Oct. 31, 1997, and the Quarterly Report on
Form 10-Q for the quarter ended Jan. 31, 1998.
# # #
(1) The company has reported earnings per share on a diluted basis
since fiscal 1994. The calculation of diluted earnings per share
includes the effect of common-stock equivalents, such as stock options,
while the calculation of basic earnings per share does not.
Microsoft is a U.S. registered trademark of Microsoft Corp.
Windows is a U.S. registered trademark of Microsoft Corp.
Windows NT is a U.S. registered trademark of Microsoft Corp.
Pentium is a U.S. registered trademark of Intel Corp.
UNIX is a registered trademark of The Open Group.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Three months Percent
ended April 30 increase
1998 1997 (decrease)
---- ---- ----------
Net revenue:
Products $ 10,338 $ 8,833
Services 1,702 1,507
------- -------
Total 12,040 10,340 16
Costs and expenses:
Cost of products sold
and services 8,224 6,743
Research and development 880 744
Selling, general and
administrative 2,064 1,751
------- -------
Total 11,168 9,238 21
Earnings from operations 872 1,102 (21)
Interest income & other, net 134 69
Interest expense 59 51
------- -------
Earnings before taxes 947 1,120 (15)
Provision for taxes 262 336
------- -------
Net earnings $ 685 $ 784 (13)
======= =======
Net earnings per share:
Basic (A) $ .66 $ .77 (14)
======= =======
Diluted(A) $ .65 .75 (13)
======= =======
Cash dividends declared per
share $ .14 $ .12
======= =======
Average shares used in
computing basic net
earnings per share 1,039 1,017
======= =======
Average shares and equivalents
used in computing diluted net
earnings per share 1,078 1,046
======= =======
Orders:
United States $ 5,338 $ 4,586 16
International 6,276 5,808 8
------- -------
Total $11,614 $ 10,394 12
======= =======
(A) The company has reported earnings per share on a diluted basis
since fiscal 1994. The calculation of diluted earnings per share
includes the effect of common-stock equivalents, such as stock
options, while the calculation of basic earnings per share does
not.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Six months Percent
ended April 30 increase
1998 1997 (decrease)
---- ---- ----------
Net revenue:
Products $ 20,496 $ 17,658
Services 3,360 2,977
------- -------
Total 23,856 20,635 16
Costs and expenses:
Cost of products sold
and services 16,061 13,437
Research and development 1,683 1,443
Selling, general and
administrative 3,936 3,372
------- -------
Total 21,680 18,252 19
Earnings from operations 2,176 2,383 (9)
Interest income & other, net 224 145
Interest expense 126 105
------- -------
Earnings before taxes 2,274 2,423 (6)
Provision for taxes 660 727
------- -------
Net earnings $ 1,614 $ 1,696 (5)
======= =======
Net earnings per share
Basic(A) $ 1.55 $ 1.67 (7)
======= =======
Diluted(A) $ 1.51 $ 1.62 (7)
======= =======
Cash dividends declared per
share $ .28 $ .24
======= =======
Average shares used in
computing basic net
earnings per share 1,039 1,017
======= =======
Average shares and equivalents
used in computing diluted net
earnings per share 1,077 1,047
======= =======
Orders:
United States $10,677 $ 8,801 21
International 13,328 12,567 6
------- -------
Total $24,005 $21,368 12
======= =======
(A) The company has reported earnings per share on a diluted basis
since fiscal 1994. The calculation of diluted earnings per share
includes the effect of common-stock equivalents, such as stock
options, while the calculation of basic earnings per share does
not.
Hewlett-Packard Company, operating in a single industry segment,
designs, manufactures and services products and systems for measurement,
computation and communications. The table below provides supplemental
information showing orders and net revenue by groupings of similar
products and services.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Orders and Net Revenue by Groupings
of Similar Products and Services
(Unaudited)
(In millions)
Three months Six months
For the periods ended April 30 1998 1997 1998 1997
---- ---- ---- ----
ORDERS *
Computer products, service
and support $ 9,785 $ 8,467 $19,977 $17,525
Test and measurement products
and services 993 1,101 2,282 2,207
Medical electronic equipment
and service 338 343 687 656
Electronic components 281 256 582 509
Chemical analysis and service 217 227 477 471
------- ------- ------- -------
Total $11,614 $10,394 $24,005 $21,368
======= ======= ======= =======
NET REVENUE *
Computer products, service $10,045 $ 8,491 $19,954 $17,077
and support
Test and measurement products
and services 1,123 1,068 2,197 2,025
Medical electronic equipment
and service 352 322 706 643
Electronic components 267 21 520 445
Chemical analysis and service 253 228 479 445
------- ------- ------- -------
Total $12,040 $10,340 $23,856 $20,635
======= ======= ======= =======
* In fiscal 1998, the company's Integrated Systems Division was
transferred from the computer products, service and support grouping
to the test and measurement products and service grouping. Fiscal
1997 orders and net revenue have been restated to be consistent with
the new presentation. The change did not affect the company's total
orders or net revenue.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In millions except par value)
(Unaudited)
ASSETS April 30 Oct. 31
1998 1997
---- ----
Current assets:
Cash and cash equivalents $ 4,387 $ 3,072
Short-term investments 650 1,497
Accounts and notes receivable 8,366 8,173
Inventories 6,700 6,763
Other current assets 1,558 1,442
------- -------
Total current assets 21,661 20,947
------- -------
Property, plant and equipment, net 6,396 6,312
Long-term investments and other assets 4,730 4,490
------- -------
$32,787 $31,749
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowing $ 1,154 $ 1,226
Accounts payable 3,084 3,185
Employee compensation and benefits 1,945 1,723
Taxes on earnings 1,796 1,515
Deferred revenues 1,325 1,152
Other accrued liabilities 2,540 2,418
------- -------
Total current liabilities 11,844 11,219
------- -------
Long-term debt 2,448 3,158
------- -------
Other liabilities 1,276 1,217
------- -------
Shareholders' equity:
Common stock and capital in excess
of $1 par value 1,184 1,187
Retained earnings 16,035 14,968
------- -------
Total shareholders' equity 17,219 16,155
------- -------
$32,787 $31,749
======= =======
# # #