The EPS number exceeded the expectations of analysts, who had anticipated HP would report per-share earnings of 87 cents. But sales at $30 billion even were light of the $30.7 billion Wall Street had expected.

Sales of PCs fell 15 percent year over year with an operating margin of 5.2 percent. Consumer sales fell by 25 percent and corporate PC sales fell 7 percent, while sales on a unit basis fell 18 percent. HP had faced a tough quarter on many fronts. With the shortage in hard drives caused by the last year’s floods in Thailand sapping overall demand for PCs, sales have been tricky and it showed. Corporate demand was thought to be relatively stable, while consumer demand continues to be slow amid stiff competition from Apple’s iPad and a tough economy overall.

Tony Sacconaghi, an analyst with Bernstein Research, said in a research note to clients issued today that HP, despite being the world’s largest vendor of PCs, appears to have struggled more with the Thailand problem than any other vendor.

On the printer front, HP’s Imaging and Printing Group saw its sales decline by 7 percent with a shockingly low 12.2 percent operating margin, down from 15.4 percent in 2011. HP’s printer unit has significant long-term problems, not the least of which is the fact that people are generally printing less. At first blush, this appears to be a serious blow to a business unit that was once the pride of the company.

Enterprise servers, Storage and Networking saw a 10 percent decline overall. The Business Critical server business — the one involving servers running Intel’s Itanium chip, which is the subject of an HP lawsuit against Oracle — saw its sales decline 27 percent. Networking revenue was flat and everything else was down.

Software was a bright spot, but a small one. Sales were up 30 percent and services grew 108 percent, but again, that’s off a low base and nowhere near large enough to offset the troubles anywhere else.

HP’s guidance for the current quarter is also below the street consensus. HP says it sees earnings of 88 to 91 cents, versus the street forecast of 95 cents. There’s no change to the full-year EPS guidance calling for $4 a share in 2012.

HP shares are down by 19 cents, or less than 1 percent in after-hours trading as of 4:26 pm ET. It’s a mixed bag, so given Dell’s performance yesterday, it seems investors are willing to accept an EPS beat alongside a slight revenue miss.

That’s a quick look at the results. HP’s conference call with analysts begins at 2 pm PT. I’ll be dialed in and liveblogging the blow-by-blow.

Here’s HP’s statement:

HP Reports First Quarter 2012 Results
— First quarter non-GAAP diluted earnings per share of $0.92, down 32% from the prior-year period and above previously provided outlook of $0.83 to $0.86 per share
— First quarter GAAP diluted earnings per share of $0.73, down 38% from the prior-year period and above previously provided outlook of $0.61 to $0.64 per share
— First quarter net revenue of $30.0 billion, down 7% from the prior- year period
— Returned $1.0 billion in cash to shareholders in the form of dividends and share repurchases
PALO ALTO, Calif., Feb. 22, 2012 – HP today announced financial results for its first fiscal quarter ended January 31, 2012. For the quarter, net revenue of $30.0 billion was down 7% from the prior-year period, and down 8% when adjusted for the effects of currency.
GAAP diluted earnings per share (EPS) was $0.73, down 38% from the prior-year period. Non-GAAP diluted EPS was $0.92, down 32% from the prior-year period. First quarter non-GAAP earnings information excludes after-tax costs of $364 million, or $0.19 per diluted share, related to amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
―In the first quarter, we delivered on our Q1 outlook and remained focused on the fundamentals to drive long-term sustainable returns,‖ said Meg Whitman, HP president and chief executive officer. ―We are taking the necessary steps to improve execution, increase effectiveness and capitalize on emerging opportunities to reassert HP’s technology leadership.‖

Earnings highlights
Information about HP’s use of non-GAAP financial information is provided under ―Use of non-GAAP financial information‖ below.
Trends and regional performance
In the Americas, first quarter revenue was $13.2 billion, down 9% year over year and down 8% when adjusted for the effects of currency. Europe, the Middle East and Africa revenue of $11.7 billion was down 4% year over year and down 5% when adjusted for the effects of currency. Revenue in Asia Pacific was $5.2 billion, representing a 10% decrease year over year and down 12% when adjusted for the effects of currency.
Revenue from outside of the United States in the first quarter accounted for 66% of total HP revenue. BRIC countries (Brazil, Russia, India and China) generated revenue of $3.1 billion, down 13% from the year-ago period, and representing 10% of total HP revenue.
Revenue in HP’s commercial businesses declined 4% year over year. Revenue in HP’s consumer businesses, within PSG and IPG, was collectively down 23% year over year.
Business group results
— Personal Systems Group (PSG) revenue declined 15% year over year with a 5.2% operating margin. Commercial client revenue declined 7%, Consumer client revenue declined 25% and Workstations revenue was flat. Total units were down 18%, with a 19% decline in desktop units and an 18% decline in notebook units.
— Services revenue of $8.6 billion grew 1% year over year with a 10.5% operating margin. Technology Services revenue grew 2%, Application and Business Services revenue was flat and IT Outsourcing revenue grew 2% year over year.
— Imaging and Printing Group (IPG) revenue declined 7% year over year with a 12.2% operating margin. Commercial hardware revenue was down 5% year over year with commercial printer units down 10%. Consumer hardware revenue was down 15% year over year with a 15% decline in printer units.
— Enterprise Servers, Storage and Networking (ESSN) revenue declined 10% year over year with an 11.2% operating margin. Networking revenue was flat, Industry Standard Servers revenue was down 11%, Business Critical Systems revenue was down 27% and Storage revenue was down 6% year over year.
— Software revenue grew 30% year over year with a 17.1% operating margin, including the results of Autonomy. Software revenue was driven by 12% license growth, 22% support growth and 108% growth in services.
— HP Financial Services revenue grew 15% year over year driven by an 8% increase in net portfolio assets and flat financing volume. The business delivered a 9.6% operating margin.
Asset management
HP generated $1.2 billion in cash flow from operations in the first quarter. Inventory ended the quarter at $7.3 billion, with days of inventory up 3 days year over year to 28 days. Accounts receivable of $15.9 billion was up 2 days year over year to 48 days. Accounts payable ended the quarter at $12.4 billion, down 2 days from the prior- year period at 48 days. HP’s dividend payment of $0.12 per share in the first quarter resulted in cash usage of $244 million. HP also utilized $780 million of cash during the quarter to repurchase approximately 29 million shares of common stock in the open market. HP exited the quarter with $8.2 billion in gross cash.

Outlook
For the second quarter of fiscal 2012, HP estimates non-GAAP diluted EPS to be in the range of $0.88 to $0.91 and GAAP diluted EPS to be in the range of $0.68 to $0.71.
Second quarter fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.20 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
There is no change to HP’s previously provided full year fiscal 2012 outlook of non-GAAP diluted EPS of at least $4.00 and GAAP diluted EPS of approximately $3.20.
Full year fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.80 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
As part of its annual financial review process, HP implemented several organizational realignments effective Q1 FY12. To provide improved visibility and comparability, HP has reflected these realignments in prior financial reporting periods on an as-if basis. These realignments resulted in, among other things, the transfer of revenue within and among various financial reporting segments and business units. The changes do not impact HP’s previously reported consolidated net revenue, earnings from operations, net earnings or earnings per share at the company level. To reflect these changes, HP released modified quarterly and annual consolidated condensed statements of earnings, segment financial results and statements of business unit revenue for fiscal 2010 and 2011, which are available on HP’s Investor Relations website at www.hp.com/investor/home.
More information on HP’s quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website at www.hp.com/investor/home.
HP’s Q1 FY12 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2012Q1webcast.

With its shares trading down 39 percent since the end of 2010, there’s clearly still a lot of work to be done. But analysts are taking notice and expressing new confidence. In a note to clients this morning, ISI analyst Brian Marshall says HP is looking better for a variety of reasons — one of them is its little-noticed IT security business.

If you break down HP’s various lines of business, you’ll find, Marshall argues, that its security assets are surprisingly strong. In 2009 and 2010, HP made two key acquisitions in the area of security: It spent $1.5 billion for ArcSight, a security software player; before that, it nabbed the networking concern 3Com for $2.7 billion. A key asset in that deal was TippingPoint, a network intrusion prevention product.

Marshall writes that HP’s security assets bring in about $1.5 billion in sales and are growing at about 30 percent year, with gross profit margins in the neighborhood of 80 percent. This compares favorably with security outfit Check Point, which trades at a multiple of about 10 times sales, Marshall says.

Security is going to matter a lot more to HP’s corporate customers, as they start sweating over intrusions by hackers and nation-states poking holes in the infrastructure and looking for valuable information to steal, he says.

If you conservatively assume that HP’s security assets are worth half as much as Check Point, or only five times sales, and then assume that they report a reasonable $2 billion in revenue in calendar 2012, (nearly 2 percent of HP’s expected total sales), you wind up with a business unit that’s worth about $10 billion, or one-fifth of HP’s market cap. Suddenly, the security push that HP announced in September makes a lot more sense.

Security, Marshall says, is just one leg of a four-legged stool that HP has in its favor. The other three legs are its enterprise storage, networking and server businesses, and the “seat” of the stool which tie them all together are the software and IT services businesses. The one weakness, he concedes, is its software portfolio, which has historically been small and limited, and accounts for about 2 percent of sales despite such big acquisitions as Mercury Interactive and Opsware.

Even so, Marshall sees a 30 percent upside to HP’s valuation, and has pegged it with a $34 price target and Buy rating.

Additionally, Chambers (pictured from his interview at D5) will likely lay out his plan to get Cisco growing again, following a restructuring that saw 6,500 jobs eliminated, and certain parts of the company — in particular, the Flip video camera business – shut down.

Financial analysts have been agitating for Cisco to take down its long-term financial models for most of the year, and since they’ll be the ones in the audience today, Chambers would be nuts not to address their concerns. The model may seem like a small detail, but analysts rely upon these forecasts in order to help them calibrate their expectations, and thus help their clients make better investment decisions going forward.

One recent suggestion for how the new model should look came from Gleacher analyst Brian Marshall in a note to clients on Aug. 11. He suggested that Cisco could realistically forecast annual revenue growth of 10 percent and an operating margin of 25 percent. Currently, he says, Cisco’s long-term growth models call for sales to grow annually in the 12 to 17 percent range, with operating margins in the range of 28 to 31 percent. Over the last five calendar years, he wrote, Cisco has averaged revenue growth of 11 percent — worse if you exclude growth from acquisitions — and operating margins just shy of 29 percent.

But it won’t all be numbers and figures today. Alongside the analysts meeting, Cisco will be talking about some new server technology it has developed internally using the UCS computing platform it developed with EMC and VMWare. Cisco has opened up a data center in Raleigh, N.C., that it says is being used for two things — applications development and disaster recovery.

Now, if you don’t know anything about disaster recovery, allow me to explain why that’s a big deal. The typical way companies use disaster recovery is to have a second data center — essentially a carbon copy of the first one that’s used day in and day out — sitting on standby, waiting for the day when it is needed. And while it’s critical to have when the power goes out at your primary site, or some natural disaster like a tornado strikes, it’s also expensive. Disaster recovery hardware sits around doing nothing important, while at the same time racking up costs for power, maintenance and floor space. Wouldn’t it be great if you could use it productively, too?

Cisco has figured out a way to do exactly that, and will demonstrate it today. The data center, which is in Research Triangle Park, has been set up to support application development on a daily basis, but if disaster strikes one of Cisco’s other main data centers — its sites in Texas, for instance — it can be turned around within 24 hours and serve as a disaster recovery site. Oddly, Cisco is demonstrating this mainly as a way of showing off what UCS can do, and it’s also sharing the particulars with customers. It is not, however, offering it as part of a new product or service.

Cisco shares are still trading in the midteens, down from a 52-week high of $24.60 in November. The shares are showing new signs of life, however. Having bounced off the bottom of a 52-week low of $13.30 last month, they’re starting to climb again. And yesterday Cisco rose 54 cents, or more than three percent, to $16.09. Investors seem hopeful that there will be a better outlook from Cisco today.

Years later, he still has the same calculator. And he still uses it constantly, just like thousands of other 12c enthusiasts.

“Whenever I switch jobs, I just peel the old business card that is on the back and tape my newest one on,” says Mr. Rothman, head of quantitative equity strategies at Barclays Capital in New York.

Thirty years after the launch of the 12c, it’s still commonplace for financial analysts filing into a conference room to set down their calculators next to their papers and cellphones.

Read the rest of this post on the original site »

Years later, he still has the same calculator. And he still uses it constantly, just like thousands of other 12c enthusiasts.

“Whenever I switch jobs, I just peel the old business card that is on the back and tape my newest one on,” says Mr. Rothman, head of quantitative equity strategies at Barclays Capital in New York.

Thirty years after the launch of the 12c, it’s still commonplace for financial analysts filing into a conference room to set down their calculators next to their papers and cellphones.

Read the rest of this post on the original site »

Welcome news, right? Sadly for Dell (DELL), it was tempered by the revelation that the company’s gross margins will fall short of Wall Street expectations. And investors weren’t too happy to hear about that, sending Dell’s shares down more than three percent in late trading. The announcement comes a day before the company’s scheduled meeting with financial analysts and four days before its annual shareholders gathering.