HP Reports Third Quarter 2011 Results and Initiates Company Transformation

• Earnings highlights:
  • Third quarter net revenue of $31.2 billion, up 1% from the prior year quarter and down 2% when adjusted for the effects of currency
  • Third quarter GAAP diluted earnings per share up 24% with non-GAAP diluted earnings per share up 2% and cash flow from operations of $3.2 billion
  • Revising full year FY11 revenue estimates to $127.2 billion to $127.6 billion
  • Revising full year FY11 GAAP diluted earnings per share outlook down to between $3.59 and $3.70 and non-GAAP diluted earnings per share outlook down to between $4.82 and $4.86
• Exploring strategic alternatives for Personal Systems Group; shutting down operations for webOS devices and exploring strategic alternatives for webOS software
• Offer to acquire Autonomy, a global leader in infrastructure software for the enterprise, to accelerate expansion in rapidly growing enterprise information management market

PALO ALTO, Calif. — (BUSINESS WIRE) — August 18, 2011 — HP (NYSE: HPQ) today announced financial results for its third fiscal quarter ended July 31, 2011, as well as the commencement of a company transformation described in detail in separate press releases issued today.

HP unveiled the details of a plan to accelerate the strategy introduced in March. The plan introduced today will:

• Move HP into higher value, higher margin growth categories
• Sharpen HP’s focus on its strategic priorities of cloud, solutions and software with an emphasis on enterprise, commercial and government markets
• Increase investment in innovation to drive differentiation

As part of the transformation, HP announced that its board of directors has authorized the exploration of strategic alternatives for the company’s Personal Systems Group. HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction. (See accompanying press release.)

HP will discontinue operations for webOS devices, specifically the TouchPad and webOS phones. The devices have not met internal milestones and financial targets. HP will continue to explore options to optimize the value of webOS software going forward.

In addition, HP announced the terms of a recommended transaction for all of the outstanding shares of Autonomy Corporation plc for £25.50 ($42.11) per share in cash. Autonomy’s software powers a full spectrum of mission-critical enterprise applications, including pan-enterprise search, customer interaction solutions, information governance, end-to-end eDiscovery, records management, archiving, business process management, web content management, web optimization, rich media management and video and audio analysis. The addition of Autonomy will accelerate HP’s ability to deliver on its strategy to offer cloud-based solutions and software that best addresses the changing needs of businesses. (See accompanying press release.)

“We’re focused on improving performance across the business,” said Léo Apotheker, HP president and chief executive officer. “HP is taking bold, transformative steps to position the company as a leader in the evolving information economy. Today’s announced plan will allow HP to drive creation of long-term shareholder value through a focus on fewer fronts, thereby improving its ability to execute, invest in innovation and drive a higher-margin business mix.”

Earnings highlights

For the quarter, net revenue of $31.2 billion was up 1% from the prior-year period as reported and down 2% when adjusted for the effects of currency.

GAAP diluted earnings per share (EPS) was $0.93, up 24% from $0.75 in the prior-year period. Non-GAAP diluted EPS was $1.10, up 2% from $1.08 in the prior-year period. Non-GAAP financial information excludes after-tax costs of approximately $0.17 per share and $0.33 per share in the third quarter of fiscal 2011 and 2010, respectively, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges. Information about HP’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.