Hewlett-Packard reports 1st quarter 2003 results

Palo Alto, Calif: HP (NYSE:HPQ) today reported financial results for its first fiscal quarter ended Jan. 31, 2003. The company reported first quarter revenue of $17.9 billion, compared to $18.0 billion in the prior quarter. Revenue reflected ongoing weakness in commercial IT spending in the United States and Japan, while Europe and Asia-Pacific posted solid revenue growth quarter over quarter.

Non-GAAP(1) (formerly reported as pro forma) operating profit totaled $1.1 billion, up 25% sequentially. Non-GAAP operating profit was 6.2% of revenue, up from 4.9% of revenue in the prior quarter. Non-GAAP diluted earnings per share (EPS) for the quarter was 29 cents, compared to 24 cents in the fourth quarter, up 21% sequentially. Non-GAAP diluted EPS and operating profit reflect a $156 million adjustment on an after-tax basis, or 5 cents on a diluted per share basis. The pre-tax adjustment includes $138 million of amortization of purchased intangible assets, and $86 million for other acquisition-related items. All non-GAAP financial information in this release is reconciled in the "Non-GAAP Consolidated Condensed Statement of Earnings" table below.
GAAP operating profit for the quarter was $879 million, up 107% sequentially. GAAP operating profit was 4.9% of revenue, up from 2.4% in the prior quarter. GAAP diluted EPS was 24 cents per share, versus 13 cents last quarter, representing an improvement of 85% sequentially.

Gross margin increased from 25.9% to 26.5%, up 0.6 percentage points sequentially, reflecting continued improvement in HP's cost structures. Integration-related cost savings for the first quarter were $734 million, up from $482 million last quarter and 14% above first-quarter plan. Non-GAAP expenses as a percent of revenue were down sequentially from 21% to 20.3% of net revenue.

"HP is making good headway and continues to execute well," said Carly Fiorina, HP chairman and chief executive officer. "The first quarter was our best overall profit performance since the merger, demonstrating there is significant leverage in our operating model. We made good progress on cost structures, achieved sequential market share gains in each of our businesses, and continued to improve gross margins. Our revenue shortfalls were largely confined to the U.S. market, as weak commercial spending continued. Outside the U.S., revenues improved 3% sequentially with strong performance in Europe and Asia-Pacific. Personal Systems posted a profit for the quarter, and Enterprise Systems improved operating results by 36% sequentially.