Financial

posted on 20 August 2008 08:10

For its Q3 fy08 HP reported surging revenues of $28 billion, up 10% from Q3 fy07's 24.5 billion. GAAP net earnings (income) were $2.0 billion ($0.80/share), 14% up on the year-ago quarter's $1.8 billion ($0.66/share).

GAAP operating margin rose to 9% from the year-ago quarter's 8.3%.

Geographically revenue growth looked like this:

- USA 4% to $11.6 billion
- EMEA 16% to $11.2 billion
- APAC 14% to $5.2 billion

Non-US revenues constituted 68% of the total. The BRIC countries (Brazil, Russia, India and China) grew 24% and constituted 10% of the total.

CEO and chairman Mark Hurd's words on the results were: "By accelerating our enterprise growth and executing well across the portfolio, HP delivered a strong third quarter performance. Our global position, broad product and services offerings and incremental cost saving opportunities make us confident that we’ll continue to meaningfully expand earnings." That outlook is reassuring to credit-crunch singed investment analysts.

HP Business Sectors

Personal Systems Group (PSG) revenue grew 15% year over year to $10.3 billion, with unit shipments up 20% on a year-over-year basis.

Imaging and Printing Group (IPG) revenue grew 3% year over year to $7.0 billion.

HP Services (HPS) revenue increased 14% year over year to $4.8 billion.

HP Software revenue grew 29% compared with the prior-year period to $781 million, led by 32% growth in the Business Technology Optimization portfolio.

HP Financial Services (HPFS) reported revenue of $680 million, an increase of 17% year over year.

Enterprise Storage and Servers (ESS) reported revenue of $4.7 billion, up 5% over the prior-year period fueled by ESS blades, which grew 66%, and Storage, which grew 16%. Storage revenue growth was driven by the midrange EVA line and the low-end MSA line, which each grew 19%.

The high-end XP Line clearly did less well. HP says StorageWorks revenues grew 16% year-on-year which suggests that the XP range grew revenues around 10 percent.

Nothing was said about tape revenues and their level. 

The overall good storage growth was not enough to help propel ESS to anything more than a slight 5% growth. Why not? What happened elsewhere in ESS?

On a year-over-year basis, Industry Standard Server revenue grew 2%. But ISS blade revenues grew 58% so other server sales dragged ISS' growth rate down.

Business Critical Systems revenue increased 2%, with Integrity systems up 18 percent. These represent 78% of BCS' revenue so, again, something pretty poor happened elsewhere in the BCS portfolio.

It looks as if server revenues outside blades and Integrity systems did poorly and probably declined.

ESS operating profit was $544 million, or 11.5% of revenue, up from $507 million, or 11.2% of revenue, in the prior-year period.

Speaking about storage trends Hurd said: "I think you are going to see much of the same thing happen in storage that you are seeing in industry standard servers -- a separate marketplace that’s going through a lot of work on virtualization, a lot of ... low-end storage being cobbled together into a very mission-critical enterprise storage system and many of these things being integrated as almost hybrids, that when you look at the data center build-outs and you look at it and you say is that a server or is that storage? And in some cases, it’s hard to tell because the interplay is so tightly knit together and connected."

Outlook

HP estimates Q4 fy08 revenue will be approximately $30.2 billion to $30.3 billion. Q4 fy08 GAAP diluted EPS is expected to be approximately $0.95 to $0.97.

Hurd said in the earnings call: "... we’re pretty confident in our position out in the market, point one. Point two, with the cost initiatives we have in the company and the other activities we have ongoing, we’re quite confident about our ability to achieve our EPS range that we’ve given."

^{[Chris Mellor.]}