Arik Hesseldahl

Recent Posts by Arik Hesseldahl

HP May Be Debt-Free This Year, CFO Lesjak Says

cathie_lesjakI just had a quick chat with Hewlett-Packard CFO Cathie Lesjak, and we ran through a couple of the key points from the earnings announcement HP released a few hours ago.

Here are a few highlights from our conversation:

Earnings: At 82 cents a share, HP pretty much blew out its earnings versus the consensus of Wall Street analysts, which was 71 cents. But that also amounts to a 15 percent beat on the high end of HP’s own guidance for the quarter. “That is one of the biggest beats I’ve seen at HP,” Lesjak said.

Cash flow: Cash flow from operations improved to $2.6 billion. That’s especially good news, Lesjak said, because the first quarter of the year tends to be seasonally weaker than others on the cash flow front.

Net debt: There’s been a lot of worry of late about HP’s debt situation. Debt investors over the summer started paying ever-higher prices to insure against the possibility, however remote, of a default. On paper, HP’s long-term debt is still rather high: $21.8 billion, or about 65 percent of market cap as of Thursday’s close.

But out of that, only $4.7 billion is debt derived from the operating company, the portion of HP that makes stuff and sells it. The rest is incurred for the purpose of HP Finance, the unit that lends money to help customers pay for HP products and services. Lesjak said there’s a pretty good chance that, on that basis, HP will be debt-free by the end of 2013. “Our goal is roughly zero,” she said.

And, as Lesjak said on the conference call, when that happens, there’s a new round of decisions to be made, such as, what to do with the cash from operations that’s flowing in. HP will have to start thinking about other ways to use that cash, such as increasing the dividend payments, buying back more shares, or maybe thinking about buying another company. That’s a good problem to have.


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