Trends and regional performance
HP saw balanced growth in the first quarter across all regions in local currency, with accelerated growth in BRIC countries (Brazil, Russia, India and China). Results were largely driven by momentum in the commercial sector as businesses continued to spend on technology. HP experienced uneven consumer performance across its geographies and product categories during the quarter.
First quarter revenue was up 6% in the Americas to $14.4 billion. Revenue was flat in Europe, the Middle East and Africa and up 7% in Asia Pacific to $12.1 billion and $5.8 billion, respectively. When adjusted for the effects of currency, revenue was up 5% in the Americas, up 4% in Europe, the Middle East and Africa and up 2% in Asia Pacific. Revenue from outside of the United States in the first quarter accounted for 65% of total HP revenue, with revenue in the BRIC countries increasing 11% while accounting for 11% of total HP revenue.
Business group highlights
- Personal Systems Group (PSG) revenue declined 1% year over year with a 6.4% operating margin. PSG delivered record operating profit in the quarter and remains the PC market leader in terms of units, revenue and profit share. The commercial refresh cycle continues, and HP saw 11% year-over-year revenue growth in Commercial Clients while revenue in Consumer Clients declined 12% in the quarter.
- Imaging and Printing Group (IPG) revenue grew 7% year over year with a 17.0% operating margin. IPG delivered strong performance across the business with share gains in all printing categories and 33% year-over-year growth in commercial printer hardware units. IPG continued to drive innovation and momentum with the new ePrint platform, graphic arts and other commercial print solutions.
- Services revenue declined 2% year over year with a 16.0% operating margin. Services operating margin expanded 30 basis points year over year due primarily to service delivery transformation efforts. Enterprise Services had solid long-term signings in the first quarter, the impact of which was partially offset by softer signings in shorter term, higher value-added services and add-on IT outsourcing projects.
- Enterprise Servers, Storage and Networking (ESSN) revenue grew 22% year over year with a 14.7% operating margin. ESSN delivered a solid quarter, demonstrating increased value to customers as they transition to hybrid cloud environments through a converged infrastructure, including innovations in servers, storage and networking.
- HP Software revenue grew 5% year over year with a 17.6% operating margin. HP Software expanded its security footprint with the integration of Fortify and ArcSight during the quarter.
- Financial Services revenue grew 15% year over year with a 9.6% operating margin. Financial Services growth was driven by both double-digit growth in lease volume and a healthy improvement in portfolio assets.
HP generated $3.1 billion in cash flow from operations in the first quarter. Inventory ended the quarter at $6.7 billion, with days of inventory flat year over year at 25 days. Accounts receivable of $16.6 billion was up 4 days year over year. Accounts payable ended the quarter at $13.5 billion, down 1 day from the prior-year period. HP’s dividend payment of $0.08 per share in the first quarter resulted in cash usage of $175 million. HP also utilized $2.3 billion of cash during the quarter to repurchase approximately 54 million shares of common stock in the open market. HP exited the quarter with $10.0 billion in gross cash.
For the second quarter of fiscal 2011, HP estimates revenue of approximately $31.4 billion to $31.6 billion, GAAP diluted EPS in the range of $0.99 to $1.01, and non-GAAP diluted EPS in the range of $1.19 to $1.21.
Second quarter fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.20 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.
HP expects full year fiscal 2011 revenue in the range $130 billion to $131.5 billion, GAAP diluted EPS in the range of $4.46 to $4.54, and non-GAAP diluted EPS in the range of $5.20 to $5.28.
Full year fiscal 2011 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.74 per share, related primarily to the amortization of purchased intangibles, restructuring charges and acquisition-related charges.
As part of its annual financial review process, HP implemented several
organizational realignments effective Q1 FY11. 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
2009 and 2010, which are available on HP’s Investor Relations website at