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EXHIBIT 99.1
[HEWLETT-PACKARD LETTERHEAD]
Editorial Contacts: HP REPORTS THIRD QUARTER RESULTS PR081601GP38
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., Aug. 16, 2001 -- Hewlett-Packard Company (NYSE:HWP) today
reported financial results for its third fiscal quarter ended July 31, 2001.
The company reported third quarter revenue of $10.1 billion, compared to $11.8
billion in last year's third quarter, a decrease of 14% as reported (10% before
the effects of foreign currency).
Pro forma earnings per share (EPS) on a diluted basis from continuing operations
was 11 cents, compared to pro forma EPS on the same basis of 50 cents in the
prior-year period. Pro forma earnings this quarter excluded $49 million of
amortization of goodwill and other intangibles, as well as a $131 million
non-recurring pre-tax loss from the sale of VeriFone.
Actual EPS on a diluted basis was 5 cents per share on approximately 2 billion
shares of common stock and equivalents outstanding. This is before a 1 cent
extraordinary gain on extinguished debt. Diluted EPS from continuing operations
for the same period last year was 50 cents. HP's overall gross margin was 25.9%,
up from 25.3% last quarter. Expenses were down 5% sequentially on a pro forma
basis.
"We are managing through what is clearly a significant global economic downturn
- -- and our results reflect this tough environment," said Carly Fiorina, chairman
and chief executive officer. "However, we are seeing positive signs that our
efforts to transform our business and improve our execution are gaining
traction, and we continue to make strategic moves to fuel growth.
"We are effectively controlling short-term expenses thanks to the efforts of HP
employees, and continuing to manage our inventory down. We're also taking
decisive actions to create market-leading cost structures
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August 16, 2001
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and improve our ability to respond to rapidly changing market conditions.
"In the enterprise channel we're receiving positive customer and partner
feedback to our `hard deck' sales engagement program. While we have more work to
do, we are without question seeing a higher level of channel interest and
engagement with HP.
"We are also continuing to take important strategic steps to build our business.
Recently we announced plans to acquire Comdisco's Continuity Business,
StorageApps and Trinagy Inc. -- all in growth areas we've targeted for
investment. At the same time, we're divesting non-strategic assets, having
completed the sale of VeriFone in the quarter."
HP's consumer business was particularly hard hit by the global economic malaise,
with revenues down 21% year over year, against a very tough compare. Despite
these difficult market conditions, HP's consumer business continues to be
profitable, maintaining or gaining share in almost every category.
HP also retained its No. 1 worldwide home PC position, showing strong growth in
Europe with a 67% increase in revenue compared to a year ago, and moving into
the No. 2 market position in consumer notebooks worldwide.
Overall revenues in HP's business sector declined 11% year over year and 8%
sequentially. However, HP Superdome servers, HP's high-end UNIX offering,
continued to experience solid revenue growth signaling the company's solutions
selling approach is gaining momentum. HP's consulting, outsourcing and support
businesses posted revenue growth which outpaced competitors.
"Simply stated, we're staying focused on our strategy, resolutely managing our
way through this economic downturn, and improving our execution so that we
emerge a stronger, more focused competitor whenever the economy rebounds," said
Fiorina.
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August 16, 2001
Page 3
"Looking forward, while market conditions remain far too dynamic to predict
outcomes, we expect to see some sequential revenue growth in Q4 due to seasonal
effects with gross margins and expenses essentially flat on a sequential basis."
WORKFORCE REDUCTION
As announced on July 26, the company has implemented a workforce reduction
program that is intended to eliminate approximately 6,000 jobs and result in an
annualized savings of about $500 million. HP expects to take a restructuring
charge in the range of $250 million to $300 million. Under the plan, the vast
majority of the 6,000 people impacted will exit the company by the end of
October.
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
declined 10% year over year (8% in local currency). Results were impacted by
economic weakness in all regions and continued decline in average selling
prices. HP LaserJet hardware revenue declined 12% year over year and Inkjet
printer revenue declined 31% year over year. Despite these declines, HP
maintained or gained share in all key printer hardware categories.
Supplies revenues were essentially flat against an exceptionally strong compare
of 30% growth in last year's Q3.
Imaging systems revenue, which includes digital cameras, photo printers,
scanners and all-in-one devices, declined 3% year over year. Weak scanner sales
and declining ASPs offset strong unit growth of 330% in digital cameras and 41%
for all-in-one devices.
Operating margin for the IPS segment was 8.9%, compared to 12.4% in the same
period last year, and 10.9% last quarter (adjusted for inventory and capacity
write-downs).
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August 16, 2001
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COMPUTING SYSTEMS
The computing systems segment includes a broad range of Internet infrastructure
systems and solutions for businesses and professionals, including workstations,
desktops, notebooks, UNIX(R) and PC servers, storage and software solutions.
Overall revenues for the segment declined 22% year over year (18% in local
currency).
UNIX server revenue was down 22% year over year and down 3% sequentially.
Overall margins in the UNIX server business remain healthy, due in large part to
the 45% sequential growth in HP Superdome server revenues. PC server revenues
declined 29% and commercial desktops declined 23% from the same period last
year.
While home PC revenues declined 36% year over year due primarily to weak demand
and associated pricing pressures in North America, HP retained its leading
position in this market. Additionally, notebooks experienced revenue growth of
5% and meaningful market share gains worldwide.
Revenues in HP's storage business declined 12% driven largely by overall
weakness in the UNIX sector and a slower sales ramp for HP's new mid-range
products. Revenues in HP's XP512 high-end disk array line were down 6% year over
year.
Revenues in HP's software business were down 16% year over year. Revenues for HP
OpenView services management software were down 6% year over year as a result of
the overall weakness in the UNIX sector.
Operating margin in the computing systems segment was a negative 4.5%, compared
to a positive 8.0% for the same period last year and negative 2.8% for the last
quarter.
IT SERVICES
Within the IT Services segment, HP's consulting business achieved 16% growth in
local currency year over year, 9% in U.S. dollars. Outsourcing revenues were up
27% in local currency year over year, 20% in U.S. dollars, and support grew 10%
in local currency year over year and 5% in U.S. dollars.
Revenues overall for the IT Services segment, which includes HP's Financial and
Complements Group (FCG), grew 9% in local currency year over year and 3% in U.S.
dollars, driven by an 8% decline in revenues for FCG as a result of management
decisions to refocus the business. FCG posted a loss for the quarter and was the
primary contributor to the decrease in operating margin.
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August 16, 2001
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Operating margin for IT Services was 1.9%, compared to 8.1% for the same period
last year and 6.0% for the last quarter.
COSTS AND EXPENSES
Cost of goods sold this quarter was 74.1% of net revenue, down from 74.7% last
quarter. Operating expenses declined 5% sequentially and were up 2% year over
year on a pro forma basis. Operating expenses were 24.0% of net revenue compared
to 22.0% for last quarter on a pro forma basis.
ASSET MANAGEMENT
Return on assets for the quarter was 6.6% on a pro forma basis, compared to 8.9%
for last quarter. Inventory was down approximately $200 million from last
quarter and was 11.7% of revenue, flat compared with last quarter. Trade
receivables were 10.4% of revenue compared to 11.7% in the previous quarter. Net
property, plant and equipment was 9.8% of revenue compared to 9.4% last 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 all. 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.
# # #
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 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 employee management issues; 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 and does not intend to update these
forward-looking statements.
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August 16, 2001
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Unaudited)
(In millions except per share amounts)
<Table>
<Caption>
Three months ended
July 31, Percent
------------------- increase/
2001 2000 (decrease)
-------- -------- ----------
Net revenue $10,147 $11,818 (14)
Costs and expenses:
Cost of products sold and services 7,520 8,308
Research and development 662 663
Selling, general and administrative 1,820 1,755
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Total costs and expenses 10,002 10,726 (7)
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Earnings from operations 145 1,092 (87)
Interest income and other, net 159 276
Interest expense 73 60
Loss on divestiture 131 --
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Earnings from continuing operations before extraordinary
item and taxes 100 1,308 (92)
(Benefit) provision for taxes (3) 279
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Net earnings from continuing operations before extraordinary
item 103 1,029 (90)
Net earnings from discontinued operations -- 17
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Net earnings before extraordinary item 103 1,046 (90)
Extraordinary item--gain on early extinguishment of debt,
net of taxes 8 --
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Net earnings $ 111 $ 1,046 (89)
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Basic net earnings per share:(A)
Net earnings from continuing operations before
extraordinary item $ 0.05 $ 0.52
Net earnings from discontinued operations -- 0.01
Extraordinary item--gain on early extinguishment of debt,
net of taxes 0.01 --
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Net earnings $ 0.06 $ 0.53
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Diluted net earnings per share:(A)
Net earnings from continuing operations before
extraordinary item $ 0.05 $ 0.50
Net earnings from discontinued operations -- 0.01
Extraordinary item--gain on early extinguishment of debt,
net of taxes 0.01 --
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Net earnings $ 0.06 $ 0.51
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Cash dividends declared per share(A) $ 0.16 $ 0.16
Average number of shares and share equivalents:(A)
Basic 1,936 1,975
Diluted 1,967 2,089
</Table>
(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.
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August 16, 2001
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Unaudited)
(In millions except per share amounts)
<Table>
<Caption>
Nine months ended
July 31, Percent
------------------- increase/
2001 2000 (decrease)
-------- -------- ----------
Net revenue $33,702 $35,519 (5)
Costs and expenses:
Cost of products sold and services 24,890 25,252
Research and development 2,020 1,941
Selling, general and administrative 5,686 5,392
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Total costs and expenses 32,596 32,585 --
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Earnings from operations 1,106 2,934 (62)
Interest income and other, net 525 641
Interest expense 233 156
Litigation settlement 400 --
Impairment losses on investments 365 --
Losses (gains) on divestitures 131 (8)
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Earnings from continuing operations before extraordinary
item and taxes 502 3,427 (85)
Provision for taxes 39 788
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Net earnings from continuing operations before extraordinary
item 463 2,639 (82)
Net earnings from discontinued operations -- 136
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Net earnings before extraordinary item 463 2,775 (83)
Extraordinary item--gain on early extinguishment of debt,
net of taxes 43 --
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Net earnings $ 506 $ 2,775 (82)
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Basic net earnings per share:(A)
Net earnings from continuing operations before
extraordinary item $ 0.24 $ 1.33
Net earnings from discontinued operations -- 0.07
Extraordinary item--gain on early extinguishment of debt,
net of taxes 0.02 --
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Net earnings $ 0.26 $ 1.40
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Diluted net earnings per share:(A)
Net earnings from continuing operations before
extraordinary item $ 0.24 $ 1.28
Net earnings from discontinued operations -- 0.06
Extraordinary item--gain on early extinguishment of debt,
net of taxes 0.02 --
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Net earnings $ 0.26 $ 1.34
======= =======
Cash dividends declared per share(A) $ 0.32 $ 0.32
Average number of shares and share equivalents:(A)
Basic 1,935 1,987
Diluted 1,976 2,086
</Table>
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(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.
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August 16, 2001
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
Excluding adjustments itemized below
(Unaudited)
(In millions except per share amounts)
<Table>
<Caption>
Three months ended
July 31, Percent
------------------- increase/
2001 2000 (decrease)
-------- -------- ----------
Net revenue $10,147 $11,818 (14)
Costs and expenses:
Cost of products sold and services 7,520 8,316
Research and development 660 662
Selling, general and administrative 1,773 1,723
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Total costs and expenses 9,953 10,701 (7)
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Earnings from operations 194 1,117 (83)
Interest income and other, net 159 252
Interest expense 73 60
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Earnings from continuing operations before extraordinary
item and taxes 280 1,309 (79)
Provision for taxes 62 270
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Net earnings from continuing operations before extraordinary
item $ 218 $ 1,039 (79)
======= =======
Net earnings per share from continuing operations before
extraordinary item:
Basic $ 0.11 $ 0.53
Diluted $ 0.11 $ 0.50
Average number of shares and share equivalents:
Basic 1,936 1,975
Diluted 1,967 2,089
The pro forma amounts above have been adjusted to exclude the following items:
Costs of products sold and services:
Enhanced Early Retirement Program $ -- $ (8)
Operating expenses:
Goodwill amortization 49 24
Enhanced Early Retirement Program -- (9)
Costs related to Agilent spin-off -- 18
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Total adjustments to operating expenses 49 33
Interest income and other, net:
Net investment gains -- (24)
Loss on divestiture 131 --
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Total adjustments to interest income and other, net 131 (24)
Income tax effect (65) 9
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Total pro forma adjustments $ 115 $ 10
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</Table>
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August 16, 2001
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
Excluding adjustments itemized below
(Unaudited)
(In millions except per share amounts)
<Table>
<Caption>
Nine months ended
July 31,
------------------- Percent
increase/
2001 2000 (decrease)
-------- -------- ----------
Net revenue $33,702 $35,519 (5)
Costs and expenses:
Cost of products sold and services 24,890 25,223
Research and development 1,997 1,923
Selling, general and administrative 5,439 5,237
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Total costs and expenses 32,326 32,383 --
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Earnings from operations 1,376 3,136 (56)
Interest income and other, net 525 587
Interest expense 233 156
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Earnings from continuing operations before extraordinary
item and taxes 1,668 3,567 (53)
Provision for taxes 367 816
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Net earnings from continuing operations before extraordinary
item $ 1,301 $ 2,751 (53)
======= =======
Net earnings per share from continuing operations before
extraordinary item:
Basic $ 0.67 $ 1.38
Diluted $ 0.66 $ 1.33
Average number of shares and share equivalents:
Basic 1,935 1,987
Diluted 1,976 2,086
The pro forma amounts above have been adjusted to exclude the following items:
Costs of products sold and services:
Enhanced Early Retirement Program $ -- $ 29
Operating expenses:
Goodwill amortization 124 63
Acquisition-related charges 44 --
Marketing realignment 102 --
Enhanced Early Retirement Program -- 54
Costs related to Agilent spin-off -- 56
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Total adjustments to operating expenses 270 173
Interest income and other, net:
Litigation settlement 400 --
Net investment losses (gains) 365 (54)
Losses (gains) on divestitures 131 (8)
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Total adjustments to interest income and other, net 896 (62)
Income tax effect (328) (28)
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Total pro forma adjustments $ 838 $ 112
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</Table>
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In millions)
<Table>
<Caption>
July 31, October 31,
2001 2000
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,727 $ 3,415
Short-term investments 513 592
Accounts receivable, net 4,900 6,394
Financing receivables, net 2,153 2,174
Inventory 5,489 5,699
Other current assets 5,180 4,970
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Total current assets 20,962 23,244
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Property, plant and equipment, net 4,613 4,500
Long-term investments and other assets 6,799 6,265
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Total assets $32,374 $34,009
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 2,012 $ 1,555
Accounts payable 3,238 5,049
Employee compensation and benefits 1,442 1,584
Taxes on earnings 2,067 2,046
Deferred revenues 1,879 1,759
Other accrued liabilities 3,312 3,204
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Total current liabilities 13,950 15,197
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Long-term debt 3,511 3,402
Other liabilities 1,044 1,201
Stockholders' equity 13,869 14,209
------- -------
Total liabilities and stockholders' equity $32,374 $34,009
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</Table>
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August 16, 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:
<Table>
<Caption>
Three months ended
July 31, Percent
------------------- increase/
2001 2000 (decrease)
-------- -------- ----------
Net revenue:
Imaging and Printing Systems $ 4,318 $ 4,802 (10)
Computing Systems 3,956 5,065 (22)
IT Services 1,879 1,831 3
Other 199 385 (48)
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Total Segments 10,352 12,083
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Eliminations / Other (205) (265)
Total HP Consolidated $10,147 $11,818 (14)
======= =======
Earnings from operations:
Imaging and Printing Systems $ 386 $ 596 (35)
Computing Systems (178) 405 (144)
IT Services 36 149 (76)
Other (128) 2 NM*
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Total Segments 116 1,152
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Eliminations / Other 29 (60)
Total HP Consolidated $ 145 $ 1,092 (87)
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</Table>
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* NM = Not meaningful
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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:
<Table>
<Caption>
Nine months ended
July 31, Percent
------------------- increase/
2001 2000 (decrease)
-------- -------- ----------
Net revenue:
Imaging and Printing Systems $14,338 $14,981 (4)
Computing Systems 13,539 14,905 (9)
IT Services 5,683 5,265 8
Other 842 1,106 (24)
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Total Segments 34,402 36,257
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Eliminations / Other (700) (738)
Total HP Consolidated $33,702 $35,519 (5)
======= =======
Earnings from operations:
Imaging and Printing Systems $ 1,440 $ 1,976 (27)
Computing Systems (327) 778 (142)
IT Services 252 390 (35)
Other (274) (46) (496)
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Total Segments 1,091 3,098
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Eliminations / Other 15 (164)
Total HP Consolidated $ 1,106 $ 2,934 (62)
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</Table>
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