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Last Update: 20-Nov-12 08:33 ET
Hewlett Packard shares plunge 10% following miss on revenues and $8.8 bln impairment
Hewlett-Packard (HPQ $12.02 -1.28) reported fourth quarter earnings of $1.16 per share, excluding non-recurring items, $0.01 better than the Capital IQ consensus of $1.15, while revenues fell 6.7% year/year to $29.96 billion versus the $30.48 billion consensus. HP recorded a non-cash charge for the impairment of goodwill and intangible assets within its Software segment of ~$8.8 billion in 4Q12. The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation plc that occurred prior to HP's acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term. The balance of the impairment charge is linked to the recent trading value of HP stock. There will be no cash impact associated with the impairment charge. HP also utilized $124 million of cash during the quarter to repurchase ~7.6 million shares of common stock in the open market. The company issued downside guidance for the first quarter with EPS of $0.68-0.71, excluding non-recurring items, versus the $0.85 consensus. The company reaffirmed guidance for fiscal year 2013 with EPS of $3.40-3.60, excluding non-recurring items, versus the $3.48 consensus. Personal Systems revenue was down 14% YoY with a 3.5% operating margin. Commercial revenue decreased 13%, and Consumer revenue declined 16%. Total units were down 12% with both Desktops and Notebooks units down 12%. Printing revenue declined 5% YoY with a 17.5% operating margin. Total hardware units were down 20% YoY. Commercial hardware units were down 15% YoY, and Consumer hardware units were down 22% YoY. Services revenue declined 6% YoY with a 14.2% operating margin. Technology Services revenue was down 4% YoY, Application and Business Services revenue was down 7% YoY, and IT Outsourcing revenue declined 6% YoY. Enterprise Servers, Storage and Networking (ESSN) revenue declined 9% YoY with an 8.3% operating margin. Networking revenue was up 7%, Industry Standard Servers revenue was down 7%, Business Critical Systems revenue was down 25%, and Storage revenue was down 13% YoY. Software revenue grew 14% YoY with a 27.2% operating margin, including the results of Autonomy. Software revenue was driven by 9% license growth, 9% support growth, and 48% growth in services. HP Financial Services revenue grew 1% YoY as a 3% increase in net portfolio assets was offset by an 11% decrease in financing volume. The business delivered a 10.8% operating margin.
