Exhibit 99.1
HP REPORTS FOURTH QUARTER AND FULL YEAR 2000 RESULTS
- - 4Q REVENUE UP 17%; EPS UP 14%
- - FY REVENUE UP 15%; EPS UP 16%
TERMINATES DISCUSSIONS WITH PWC
PALO ALTO, Calif., Nov. 13, 2000 -- Hewlett-Packard Company (NYSE: HWP) today
reported 17% revenue growth (20% excluding currency effects) in its fourth
fiscal quarter ended Oct. 31, 2000. Excluding extraordinary other income and
restructuring expenses, diluted earnings per share (EPS) was up 14% from the
year-ago quarter.
During the quarter, HP completed its previously announced 2-for-1 split of
its common stock in the form of a stock dividend. Share and per-share amounts
have been adjusted to reflect this split.
Net revenue was $13.3 billion, compared with $11.4 billion in last year's
fourth quarter. EPS for the quarter was 41 cents on a diluted basis,(1)
excluding investment and divestiture gains and losses, the effects of stock
appreciation rights and balance sheet translation, and restructuring
expenses. Including these items, diluted EPS on a reported basis was 45 cents
per share on approximately 2.05 billion shares of common stock and
equivalents outstanding. This compares with diluted EPS of 36 cents in the
same period last year(2).
"We are pleased that revenue growth is accelerating, but very disappointed
that we missed our EPS growth target this quarter due to the confluence of a
number of issues that we now understand and are urgently addressing. I accept
full responsibility for the shortfall," said Carly Fiorina, HP chairman,
president and chief executive officer.
"Issues that reduced profitability included margin pressures, adverse
currency effects, higher-than-expected expenses, and business mix. The good
news is that our business is healthy, demand is strong, and we are making
good progress against our strategic objectives as we continue the hard work
of reinventing HP. We are determined to
succeed and are not backing away from our growth targets," Fiorina said.
HP also announced it has terminated discussions with PricewaterhouseCoopers
(PwC) regarding the potential acquisition of its consulting business.
Fiorina said, "We are disappointed that we have not been able to reach a
mutually acceptable agreement to acquire PwC's consulting business. This is a
high-quality operation, and we believe the strategic logic underlying this
acquisition is compelling. However, given the current market environment, we
are no longer confident that we can satisfy our value creation and employee
retention objectives -- and I am unwilling to subject the HP organization to
the continuing distraction of pursuing this acquisition any further. We
remain committed to aggressively growing our consulting capabilities,
organically and possibly by acquisition, and are open to other business
arrangements to achieve our goals."
BUSINESS SUMMARY
Net revenue in the United States was $6.0 billion, an increase of 13% from
the year-ago quarter. Revenue from outside the U.S. rose 20% (26% in local
currency) to $7.3 billion. In Europe, revenue was $4.5 billion, an increase
of 15% (27% in local currency). In Asia Pacific, revenue was $1.9 billion, an
increase of 36% (34% in local currency). In Latin America, revenue increased
11% to $0.6 billion.
IMAGING AND PRINTING SYSTEMS
The imaging and printing systems segment -- laser and inkjet printing, and
imaging devices and associated supplies --grew 6% in revenue year over year
(9% in local currency) against a very strong quarter last year. Internet
printing and a migration to color are driving strategy and growth. Strong
sales of supplies, scanners, all-in-one (AiO) products, and consumer imaging
devices, as well as overall strength in Europe and Asia, partially offset
softness in the U.S. business printing market and continuing price erosion in
inkjet printers.
Nearly 12 million printing and scanning devices were shipped during the
quarter. HP's color LaserJet market share continues to grow and new products
began shipping in October. Imaging revenues grew 31% over the year-ago
period, driven by strong performances in all product lines: AiOs up 31%,
scanners up 12% and digital cameras and printers up 137%. AiO units were up
53% and PhotoSmart printer units were up 208%. Supplies revenues grew 15%
against a strong quarter last year.
Operating margin was 13.4%, up from 13.2% last year.
COMPUTING SYSTEMS
The computing systems segment -- a broad range of Internet infrastructure
systems and solutions for businesses and consumers, including workstations,
desktops, notebooks, mobile devices, UNIX-Registered Trademark- and PC
servers, storage and software solutions -- grew 29% in revenue year over year
(32% in local currency) with strong performances across all product
categories.
UNIX server revenues rose 23% year over year, with orders up 43%, driven by
excellent performance in low- and mid-range servers. Superdome, HP's new
high-end server introduced this quarter, is achieving stronger-than-expected
market acceptance, and volume shipments remain on schedule for January.
NetServer revenues were up 20%. Enterprise storage revenues were up 40% with
the HP Surestore E Disk Array XP512, HP's flagship enterprise storage
product, up 90% in revenues with strong backlog. Software revenues (excluding
VeriFone) were up 18%, but down sequentially with strong order backlog at the
end of the quarter. OpenView revenues were up 29% with orders up 60%. PC
revenues were up 40%, with home PC revenues up 62%, notebooks up 164%,
workstations up 11%, and commercial desktops up 8%.
Operating margin was 3.7%, up from 3.2% last year, but down sequentially from
7.3% in the third quarter primarily due to margin pressures, higher expenses
and mix changes.
IT SERVICES
The IT services segment -- hardware and software services, along with
mission-critical, outsourcing, consulting and customer financing services --
grew 15% in revenue year over year (18% in local currency). HP's consulting
business achieved in 46% revenue growth, with substantial new hires
broadening and deepening the organization's capabilities.
Operating margin was 7.4%, essentially flat with 7.5% last year.
COSTS AND EXPENSES
Cost of goods sold this quarter was 72.5% of net revenue, up from 71.3% in
the year-ago period. Expenses grew 15%. After adjusting for currency, expense
growth was 17%. Operating expenses, as reported, were 20.3% of net revenue.
This compares with 20.7% in the comparable period last year.
ASSET MANAGEMENT
Return on assets for the quarter was 10.5% compared with 9.8% in the
comparable quarter last year. Inventory was 11.7% of revenue compared with
11.5% in last year's fourth fiscal quarter. Trade receivables were 13.1% of
revenue compared with 14.1% in the prior year period. Net property, plant and
equipment was 9.2% of revenue compared with 10.2% in the year-ago quarter.
FULL-YEAR REVIEW
Net revenue increased 15% to $48.8 billion. Net revenue in the United States
rose 14% to $21.6 billion, while revenue from outside the United States
increased 16% to $27.2 billion.
Net earnings from continuing operations were $3.6 billion, an increase of
15%, compared with $3.1 billion in fiscal 1999. Net earnings per share were
$1.73 on a diluted basis, up 16% from $1.49 last year.
OUTLOOK FOR FY 2001
For the 2001 fiscal year ending Oct. 31, 2001, HP expects to achieve revenue
growth in the range of 15 to 17%, compared to 15% in FY 2000. Gross margin
percentage in FY 2001 is expected to be in the range of 27.5 to 28.5%,
compared to 28.5% in FY 2000, with improvements beginning in the 2nd quarter.
Total operating expenses in FY 2001 are expected to be approximately 10 to
12% above FY 2000. Tax rate is expected to remain constant at approximately
23%.
The forward-looking statements in this Outlook are based on current
expectations and are subject to risks, uncertainties and assumptions described
under the sub-heading "Forward-Looking Statements." Actual results may differ
materially from the expectations expressed above. These statements do not
include the potential impact of any mergers, acquisitions or other business
combinations that may be completed after Oct. 31, 2000.
HP will be discussing its fourth quarter results and its 2001 outlook on a
conference call today, beginning at 6 a.m. (PST). A live Webcast of the
conference call will be available at
http://www.hp.com/hpinfo/investor/quarters/2000/q4webcast.html. A replay of
the Webcast will be available at the same Web site shortly after the call and
will remain available through 4:30 p.m. PST on Nov. 22, 2000.
ABOUT HP
Hewlett-Packard Company -- a leading global provider of computing and imaging
solutions and services -- is focused on making technology and its benefits
accessible to individuals and businesses through simple appliances, useful
e-services and an Internet infrastructure that's always on.
HP has 88,500 employees worldwide and had total revenue from continuing
operations of $48.8 billion in its 2000 fiscal year. Information about HP and
its products can be found on the World Wide Web at http://www.hp.com.
###
More information on this quarter's earnings is available at HP's Investor
Information site at http://www.hp.com/hpinfo/investor/quarters/quarters.html.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements that involve risks and
uncertainties, as well as assumptions that, if they never materialize or
prove incorrect, could cause the results of HP and its consolidated
subsidiaries to differ materially from those expressed or implied by such
forward-looking statements. All statements other than statements of
historical fact are forward-looking statements, including any projections of
earnings, revenues, or other financial items; any statements of the plans,
strategies, and objectives of management for future operations; any
statements concerning proposed products, services, or developments; any
statements regarding future economic conditions or performance; statements of
belief and any statement of assumptions underlying any of the foregoing. The
risks, uncertainties and assumptions referred to above include the ability of
HP to retain and motivate key employees; the timely development, production
and acceptance of products and services and their feature sets; the challenge
of managing asset levels, including inventory; the flow of products into
third-party distribution channels; the difficulty of keeping expense growth
at modest levels while increasing revenues; and other risks that are
described from time to time in HP's Securities and Exchange Commission
reports, including but not limited to the annual report on Form 10-K for the
year ended Oct. 31, 1999, and subsequently filed reports. HP does not intend
to update these forward-looking statements.
(1) 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. Share and per-share amounts reflect the
2-for-1 stock split distributed on Oct. 27, 2000.
(2) EPS for fourth quarter 1999 is adjusted for expenses related to the
spin-off of Agilent Technologies and the incremental effect of Stock
Appreciation Rights.
UNIX is a registered trademark of the Open Group.
Windows NT is a U.S. registered trademark of Microsoft Corp.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Three months ended Percent
October 31 increase/
2000 1999 (decrease)
------- ------- --------
Net revenue $13,263 $11,362 17
Costs and expenses:
Cost of products sold and services 9,612 8,102
Research and development 705 612
Selling, general and administrative 1,991 1,739
------- -------
Total costs and expenses 12,308 10,453 18
------- -------
Earnings from operations 955 909 5
Interest income and other, net 344 161
Interest expense 101 65
------- -------
Earnings from continuing operations before taxes . 1,198 1,005 19
Provision for taxes 276 245
------- -------
Net earnings from continuing operations 922 760 21
------- -------
Net earnings from discontinued operations -- --
------- -------
Net earnings $ 922 $ 760 21
======= =======
Net earnings per share: Continuing operations(A)
Basic $ 0.47 $ 0.38
Diluted $ 0.45 $ 0.36
Net earnings per share: Discontinued operations(A)
Basic $ -- $ --
Diluted $ -- $ --
Net earnings per share: Total(A)
Basic $ 0.47 $ 0.38
Diluted $ 0.45 $ 0.36
Cash dividends declared per share(A) $ -- $ --
Average number of shares and equivalents(A)
Basic 1,955 2,010
Diluted 2,051 2,108
(A) 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. Share and per-share amounts reflect the 2-for-1
stock split distributed on Oct. 27, 2000.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(In millions except per share amounts)
Twelve months ended Percent
October 31 increase/
2000 1999 (decrease)
------- ------- ---------
(unaudited)
Net revenue $48,782 $42,370 15
Costs and expenses:
Cost of products sold and services 34,864 29,720
Research and development 2,646 2,440
Selling, general and administrative 7,383 6,522
------- -------
Total costs and expenses 44,893 38,682 16
------- -------
Earnings from operations 3,889 3,688 5
Interest income and other, net 993 708
Interest expense 257 202
------- -------
Earnings from continuing operations before taxes 4,625 4,194 10
Provision for taxes 1,064 1,090
------- -------
Net earnings from continuing operations 3,561 3,104 15
------- -------
Net earnings from discontinued operations 136 387
------- -------
Net earnings $ 3,697 $ 3,491 6
======= =======
Net earnings per share: Continuing operations(A)
Basic $ 1.80 $ 1.54
Diluted $ 1.73 $ 1.49
Net earnings per share: Discontinued operations(A)
Basic $ 0.07 $ 0.19
Diluted $ 0.07 $ 0.18
Net earnings per share: Total(A)
Basic $ 1.87 $ 1.73
Diluted $ 1.80 $ 1.67
Cash dividends declared per share(A) $ 0.32 $ 0.32
Average number of shares and equivalents(A)
Basic 1,979 2,018
Diluted 2,077 2,105
(A) 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. Share and per-share amounts reflect the 2-for-1
stock split distributed on Oct. 27, 2000.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In millions)
October 31
2000 1999
-------- --------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,415 $ 5,411
Short-term investments 592 179
Accounts receivable 6,394 5,958
Financing receivables 2,174 1,889
Inventory 5,699 4,863
Other current assets 4,970 3,342
-------- --------
Total current assets 23,244 21,642
-------- --------
Property, plant and equipment, net 4,500 4,333
Long-term investments and other assets 6,265 5,789
Net assets of discontinued operations - 3,533
-------- --------
Total assets $ 34,009 $ 35,297
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 1,555 $ 3,105
Accounts payable 5,049 3,517
Employee compensation and benefits 1,584 1,287
Taxes on earnings 2,046 2,152
Deferred revenues 1,759 1,437
Other accrued liabilities 3,204 2,823
-------- --------
Total current liabilities 15,197 14,321
-------- --------
Long-term debt 3,402 1,764
Other liabilities 1,201 917
Stockholders' equity 14,209 18,295
-------- --------
Total liabilities and stockholders' equity $ 34,009 $ 35,297
======== ========
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Net revenue (which includes intersegment revenue), earnings from operations and
assets for each segment are provided in the table below:
Three months ended Percent
October 31 increase/
2000 1999 (decrease)
-------- -------- --------
Net revenue:
Imaging and Printing Systems $ 5,485 $ 5,181 6
Computing Systems 5,866 4,556 29
IT Services 1,875 1,636 15
Other 364 232 57
-------- --------
Total Segments 13,590 11,605
-------- --------
Eliminations / Other (327) (243)
Total HP Consolidated $ 13,263 $ 11,362 17
======== ========
Earnings from operations:
Imaging and Printing Systems $ 735 $ 683 8
Computing Systems 215 148 45
IT Services 139 122 14
Other (47) (29) 62
-------- --------
Total Segments 1,042 924
-------- --------
Eliminations / Other (87) (15)
Total HP Consolidated $ 955 $ 909 5
======== ========
Twelve months ended Percent
October 31 increase/
2000 1999 (decrease)
-------- -------- ----------
Net revenue:
Imaging and Printing Systems $ 20,476 $ 18,550 10
Computing Systems 21,095 17,814 18
IT Services 7,129 6,255 14
Other 1,299 886 47
-------- --------
Total Segments 49,999 43,505
-------- --------
Eliminations / Other (1,217) (1,135)
Total HP Consolidated $ 48,782 $ 42,370 15
======== ========
Earnings from operations:
Imaging and Printing Systems $ 2,746 $ 2,335 18
Computing Systems 960 850 13
IT Services 634 575 10
Other (103) (71) 45
-------- --------
Total Segments 4,237 3,689
-------- --------
Eliminations / Other (348) (1)
Total HP Consolidated $ 3,889 $ 3,688 5
======== ========
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Percent
October 31 increase/
2000 1999 (decrease)
------- ------- ----------
Assets:
Imaging and Printing Systems $ 7,571 $ 7,150 6
Computing Systems 6,686 5,846 14
IT Services 8,455 7,100 19
Other 446 250 78
------- -------
Total Segments $23,158 $20,346
------- -------
Corporate / Other 10,851 11,418
Total assets from continuing operations: $34,009 $31,764 7
------- -------
Net assets of discontinued operations: $ -- $ 3,533
------- -------
Total HP Consolidated $34,009 $35,297 (4)
======= =======
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