EXHIBIT 99.1
[HP LETTERHEAD]
Editorial Contacts: HP REPORTS FIRST QUARTER RESULTS PR021501GP15
Dave Berman, HP
+1 650 857 7277
dave_berman@hp.com
Suzette Stephens, HP
+1 650 236 5127
suzette_stephens@hp.com
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PALO ALTO, Calif., Feb. 15, 2001 -- Hewlett-Packard Company (NYSE: HWP) today
reported financial results for its first fiscal quarter ended Jan. 31, 2001.
The company reported first quarter revenue of $11.9 billion, compared to $11.7
billion in last year's first quarter, an increase of 2% as reported and 7%
before the effects of foreign currency.
Pro forma earnings per share (EPS) on a diluted basis, excluding certain items,
was 37 cents, compared to pro forma EPS of 40 cents in the prior-year period.
Items excluded from pro forma earnings were:
- - $365 million, or 15 cents per share after tax, charge stemming from
impairment of investments in emerging market companies. This action was
taken after careful consideration of the multi-year impact of current and
expected market conditions on HP's entire investment portfolio;
- - A $102 million, or 3 cents per share after tax, charge associated with
the previously announced the elimination of approximately 1,700 marketing
positions;
- - $44 million, or 2 cents per share, of in-process R&D costs associated with
the Bluestone Software acquisition, costs related to the proposed
acquisition of PricewaterhouseCoopers management consultancy, and other
acquisition-related charges;
- - $26 million, or 1 cent per share, of amortization of goodwill and other
intangibles.
Actual EPS on a diluted basis before a 1 cent extraordinary gain on
extinguished debt was 16 cents per share on approximately 2 billion shares of
common stock and equivalents outstanding. Diluted EPS for the same period
last year was 38 cents.
February 15, 2001
Page 2
"Clearly, this was a tough quarter and our results reflect that. Continued
deterioration in the U.S. economy, and related weakness in consumer and
business IT spending, contributed to a sales slowdown in North America with
revenues declining by 6% year over year. More specifically, difficult U.S.
market conditions impacted our consumer and commercial desktop PC business
and our printer hardware businesses," said Carly Fiorina, chairman, president
and chief executive officer.
"Revenues in all other regions grew 8%, 17% before currency effects. Europe
posted growth of 7% as reported, 20% before currency effects; Asia Pacific
grew 10% as reported, 12% before currency effects; and Latin America
increased by 14% as reported.
"From an execution point of view, our performance in the commercial channel was
disappointing. Performance issues were related to insufficient demand generation
funds and account conflicts, which we are addressing. This had a material impact
on the results for our PC server and UNIX server businesses," said Fiorina.
"On a positive note, we effectively managed expense growth to just 4% for the
quarter. Our channel inventories are in good condition. Our balance sheet
remains strong. Our printing and imaging business remains very strong despite
U.S. hardware declines. We're holding or gaining share in this business and
supplies growth was 16% with digital imaging up 21%. We also saw significant
progress in a number of our always on infrastructure businesses. Large
corporate accounts grew 26%, software grew 21%, enterprise storage was up
20%, and IT consulting grew 56% year over year. And our consumer business as
a whole maintained or grew share in this challenging economic environment.
February 15, 2001
Page 3
"Given ongoing economic uncertainty in the U.S., and the potential that this
uncertainty may spread to other regions, especially those dependent on
exports to the U.S., we are maintaining our revenue guidance for the second
fiscal quarter in the low-to-mid single digits. We could see revenue growth
improvement in the second half if the U.S. economy improves as some
economists expect and current foreign exchange rates hold. However,
visibility remains extremely limited and we are not counting on a return to
double-digit revenue growth this year. Despite short-term challenges, we
believe the markets we participate in offer strong growth opportunity going
forward and we remain confident in our strategy."
BUSINESS SEGMENT RESULTS
IMAGING AND PRINTING SYSTEMS
The imaging and printing systems segment includes laser and InkJet printers,
imaging devices and associated supplies. Revenues overall for the segment
were essentially flat year over year (up 4% in local currency). Revenues in
North America were down 4%, while international revenues were up 5%. While
revenue growth slowed, HP continued to hold or gain share and supplies growth
continued to be strong. HP saw continued strong sales in the market overall
for color LaserJets, supplies, scanners, all-in-one (AIO) products, and
consumer imaging devices.
Imaging revenues grew 21% over the year-ago period, with AIOs up 26% and
scanners up 8%. Supplies revenues grew 16%, resulting from an expanding
installed base and an increase in sales of color LaserJet supplies.
Operating margin was 12.8%, compared to 13.6% for the same period last year and
12.6% for last quarter.
February 15, 2001
Page 4
COMPUTING SYSTEMS
The computing systems segment includes a broad range of Internet infrastructure
systems and solutions for businesses and professionals, including workstations,
desktops, notebooks, mobile devices, UNIX(R) and PC servers, storage and
software solutions. Overall revenues for the segment rose 2% year over year (8%
in local currency).
UNIX server revenues rose 6% year over year, with strong growth in enterprise
accounts offset by declines in channel-driven revenue. Volume shipments of
Superdome, HP's high-end UNIX system, commenced on schedule in January. The
sales funnel is strong, although the sales cycle is longer than expected.
PC server and commercial desktop PC revenues were both down 11%. Home PC
revenues were flat, notebooks were up 54% and technical workstations were up 6%
for the quarter.
Enterprise storage revenues were up 20%, with continued strength from HP's
core HP Surestore Disk Array XP512 storage offering as well as leading-edge
storage area network solutions. The overall XP storage business grew 50% this
quarter. Software revenues were up 21%, with HP OpenView service management
software revenues up 38%.
Operating margin in this business was a negative 0.4%, compared to 3.9% for
the same period last year and 4.0% client for the last quarter. This was due
primarily to losses in the PC server and PC client businesses.
IT SERVICES
The IT services segment includes mission-critical, outsourcing, consulting and
customer financing services. Revenues overall for the segment grew 13% year over
year (21% in local currency). HP's consulting business achieved 56% revenue
growth, with professional utilization at all-time highs and significant backlog
as HP customers increased their demand for integrated solutions. Outsourcing
revenues were up 12% worldwide, while support grew at 5%.
Operating margin was 5.3%, compared to 7.5% for the same period last year and
4.5% for the last quarter.
February 15, 2001
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COSTS AND EXPENSES
Cost of goods sold this quarter was 72.8% of net revenue, up from 71.5% in
the year-ago period. Operating expenses grew 4% on a pro forma basis, and
were 20.4% of net revenue. This compares to 20.0% on a pro forma basis for
the same period last year.
HP expects its pro forma tax rate for FY2001 to be approximately 22%.
ASSET MANAGEMENT
Return on assets on a pro forma basis for the quarter was 10.7%, compared to
10.6% for the same period last year. Inventory was 12.4% of revenue compared to
11.6% in last year's first fiscal quarter. Trade receivables were 12.2% of
revenue compared to 12.4% in the prior-year period. Net property, plant and
equipment was 9.3% of revenue compared to 9.9% in the year-ago quarter.
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 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.
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UNIX is a registered trademark of the Open Group.
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
statements that could be deemed 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 new products, services, or developments; any
statements
February 15, 2001
Page 6
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, 2000,
and subsequently filed reports. HP assumes no obligation to update these
forward-looking statements.
February 15, 2001
Page 7
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Three months ended Percent
January 31 increase/
2001 2000 (decrease)
------ ------ ----------
Net revenue $ 11,948 $ 11,673 2
Costs and expenses:
Cost of products sold and services 8,703 8,349
Research and development 673 607
Selling, general and administrative 1,935 1,765
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Total costs and expenses 11,311 10,721 6
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Earnings from operations 637 952 (33)
Interest income and other, net 212 163
Interest expense 89 56
Impairment losses on investments 365 -
------- -------
Earnings before extraordinary item and taxes 395 1,059 (63)
Provision for taxes 90 265
------- -------
Net earnings before extraordinary item 305 794 (62)
Extraordinary item - gain on extinguishment
of debt, net of taxes 23 -
------- -------
Net earnings $ 328 $ 794 (59)
======= =======
Basic net earnings per share(A)
Net earnings before extraordinary item $ 0.16 $ 0.40
Extraordinary item - gain on extinguishment
of debt, net of taxes 0.01 -
------- -------
Net earnings $ 0.17 $ 0.40
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February 15, 2001
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS (CONTINUED)
(Unaudited)
(In millions except per share amounts)
Three months ended Percent
January 31 increase/
2001 2000 (decrease)
------ ------ ----------
Diluted net earnings per share(A)
Net earnings before extraordinary item $ 0.16 $ 0.38
Extraordinary item - gain on extinguishment
of debt, net of taxes 0.01 -
------- -------
Net earnings $ 0.17 $ 0.38
======= =======
Cash dividends declared per share(A) $ 0.16 $ 0.16
Average number of shares and share equivalents(A)
Basic 1,930 1,997
Diluted 1,996 2,086
(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. All share and per-share amounts reflect the
two-for-one stock split effective October 27, 2000.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
Excluding adjustments itemized below
(Unaudited)
(In millions except per share amounts)
Three months ended Percent
January 31 increase/
2001 2000 (decrease)
------ ------ ----------
Net revenue $ 11,948 $ 11,673 2
Costs and expenses:
Cost of products sold and services 8,703 8,349
Research and development 654 607
Selling, general and administrative 1,782 1,726
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Total costs and expenses 11,139 10,682 4
------- -------
Earnings from operations 809 991 (18)
Interest income and other, net 212 163
Interest expense 89 56
------- -------
Earnings before extraordinary item and taxes 932 1,098 (15)
Provision for taxes 205 273
------- -------
Net earnings before extraordinary item $ 727 $ 825 (12)
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February 15, 2001
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS (CONTINUED)
Excluding adjustments itemized below
(Unaudited)
(In millions except per share amounts)
Three months ended Percent
January 31 increase/
2001 2000 (decrease)
------ ------ ----------
Net earnings per share before extraordinary item
Basic $ 0.38 $ 0.41
Diluted 0.37 0.40
Average number of shares and share equivalents
Basic 1,930 1,997
Diluted 1,996 2,086
The pro forma amounts above have been adjusted to exclude the following items:
Operating expenses:
Marketing realignment $ 102 $ -
Acquisition-related charges 44 -
Goodwill amortization 26 18
Costs related to Agilent spin-off - 21
------ ------
Total adjustments to operating expenses 172 39
Other income, net:
Impairment losses on investments 365 -
Income tax effect (115) (8)
------ ------
Total pro forma adjustments $ 422 $ 31
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February 15, 2001
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTED CONSOLIDATED CONDENSED BALANCE SHEET
(In millions)
January 31 October 31
2001 2000
------------ -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,297 $ 3,415
Short-term investments 555 592
Accounts receivable, net 6,001 6,394
Financing receivables, net 2,192 2,174
Inventory 6,095 5,699
Other current assets 5,499 4,970
-------- --------
Total current assets 22,639 23,244
-------- --------
Property, plant and equipment, net 4,563 4,500
Long-term investments and other assets 6,177 6,265
-------- --------
Total assets $ 33,379 $ 34,009
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 2,321 $ 1,555
Accounts payable 4,094 5,049
Employee compensation and benefits 1,438 1,584
Taxes on earnings 1,762 2,046
Deferred revenues 1,902 1,759
Other accrued liabilities 3,708 3,204
-------- --------
Total current liabilities 15,225 15,197
-------- --------
Long-term debt 3,037 3,402
Other liabilities 981 1,201
Stockholders' equity 14,136 14,209
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Total liabilities and stockholders' equity $ 33,379 $ 34,009
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February 15, 2001
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Net revenue (which includes intersegment revenue) and earnings from operations
for each segment are provided in the tables below:
Three months ended Percent
January 31 increase/
2001 2000 (decrease)
------ ------ ----------
Net revenue:
Imaging and Printing Systems $ 5,042 $ 5,034 -
Computing Systems 4,921 4,837 2
IT Services 1,891 1,676 13
Other 331 318 4
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Total Segments 12,185 11,865
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Eliminations / Other (237) (192)
Total HP Consolidated $ 11,948 $ 11,673 2
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Earnings from operations:
Imaging and Printing Systems $ 644 $ 683 (6)
Computing Systems (19) 190 (110)
IT Services 101 125 (19)
Other (60) (28) 114
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Total Segments 666 970
-------- --------
Eliminations / Other (29) (18)
Total HP Consolidated $ 637 $ 952 (33)
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