To supplement HP's consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash, free cash flow, net debt and operating company net debt. HP also provides forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below or elsewhere in the materials accompanying this news release. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP management compensates for those limitations, and the substantive reasons why HP management believes that these non-GAAP measures provide useful information to investors is included under "Use of Non-GAAP Financial Measures" after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for operating profit, operating margin, net earnings, diluted earnings per share, cash and cash equivalents, cash flow from operations or total company debt prepared in accordance with GAAP.
Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, earnings, earnings per share, tax provisions, cash flows, benefit obligations, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of restructuring plans and any resulting cost savings or revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the need to address the many challenges facing HP's businesses; the competitive pressures faced by HP's businesses; risks associated with executing HP's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP's products and services effectively; the protection of HP's intellectual property assets, including intellectual property licensed from third parties; risks associated with HP's international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the execution, timing and results of restructuring plans, including estimates and assumptions related to the cost and the anticipated benefits of implementing those plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP's Annual Report on Form 10-K for the fiscal year ended October 31, 2012 and HP's other filings with the Securities and Exchange Commission, including HP's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2013. As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP's Form 10-Q for the fiscal quarter ended July 31, 2013. In particular, determining HP's actual tax balances and provisions as of July 31, 2013 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP's Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Three months ended
----------------------------------
July 31, April 30, July 31,
2013 2013 2012
---------- ---------- ----------
Net revenue $ 27,226 $ 27,582 $ 29,669
Costs and expenses:
Cost of sales 20,859 21,055 22,820
Research and development 797 815 854
Selling, general and administrative 3,274 3,342 3,366
Amortization of purchased intangible
assets 356 350 476
Impairment of goodwill and purchased
intangible assets - - 9,188
Restructuring charges 81 408 1,795
Acquisition-related charges 4 11 3
---------- ---------- ----------
Total costs and expenses 25,371 25,981 38,502
---------- ---------- ----------
Earnings (loss) from operations 1,855 1,601 (8,833)
Interest and other, net (146) (193) (224)
---------- ---------- ----------
Earnings (loss) before taxes 1,709 1,408 (9,057)
(Provision) benefit for taxes (319) (331) 200
---------- ---------- ----------
Net earnings (loss) $ 1,390 $ 1,077 $ (8,857)
========== ========== ==========
Net earnings (loss) per share:
Basic $ 0.72 $ 0.56 $ (4.49)
Diluted $ 0.71 $ 0.55 $ (4.49)
Cash dividends declared per share $ 0.29 $ - $ 0.26
Weighted-average shares used to compute
net earnings (loss) per share:
Basic 1,929 1,935 1,971
Diluted 1,948 1,947 1,971
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Nine months ended
July 31,
------------------------
2013 2012
----------- -----------
Net revenue $ 83,167 $ 90,398
Costs and expenses:
Cost of sales 63,943 69,674
Research and development 2,406 2,490
Selling, general and administrative 9,916 10,273
Amortization of purchased intangible assets 1,056 1,412
Impairment of goodwill and purchased intangible
assets - 9,188
Restructuring charges 619 1,888
Acquisition-related charges 19 42
----------- -----------
Total costs and expenses 77,959 94,967
----------- -----------
Earnings (loss) from operations 5,208 (4,569)
Interest and other, net (518) (688)
----------- -----------
Earnings (loss) before taxes 4,690 (5,257)
Provision for taxes (991) (539)
----------- -----------
Net earnings (loss) $ 3,699 $ (5,796)
=========== ===========
Net earnings (loss) per share:
Basic $ 1.91 $ (2.93)
Diluted $ 1.89 $ (2.93)
Cash dividends declared per share $ 0.55 $ 0.50
Weighted-average shares used to compute net
earnings (loss) per share:
Basic 1,939 1,977
Diluted 1,952 1,977
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Three
Three months Three
months Diluted ended Diluted months Diluted
ended earnings April earnings ended earnings
July 31, per 30, per July 31, per
2013 share 2013 share 2012 share
-------- -------- -------- -------- -------- --------
GAAP net earnings
(loss) $ 1,390 $ 0.71 $ 1,077 $ 0.55 $ (8,857) $ (4.49)
Non-GAAP
adjustments:
Amortization of
purchased
intangible
assets 356 0.19 350 0.17 476 0.25
Impairment of
goodwill and
purchased
intangible
assets(a) - - - - 9,188 4.66
Restructuring
charges 81 0.04 408 0.21 1,795 0.91
Acquisition-
related
charges 4 - 11 0.01 3 -
Wind down of
non-strategic
businesses(b) - - - - 108 0.05
Adjustments for
taxes(c) (155) (0.08) (148) (0.07) (740) (0.38)
-------- -------- -------- -------- -------- --------
Non-GAAP net
earnings $ 1,676 $ 0.86 $ 1,698 $ 0.87 $ 1,973 $ 1.00
======== ======== ======== ======== ======== ========
GAAP earnings
(loss) from
operations $ 1,855 $ 1,601 $ (8,833)
Non-GAAP
adjustments:
Amortization of
purchased
intangible
assets 356 350 476
Impairment of
goodwill and
purchased
intangible
assets(a) - - 9,188
Restructuring
charges 81 408 1,795
Acquisition-
related
charges 4 11 3
Wind down of
non-strategic
businesses(b) - - 108
-------- -------- --------
Non-GAAP earnings
from operations $ 2,296 $ 2,370 $ 2,737
======== ======== ========
GAAP operating
margin 7% 6% (30%)
Non-GAAP
adjustments 1% 3% 39%
-------- -------- --------
Non-GAAP
operating margin 8% 9% 9%
======== ======== ========
(a) For the period ended July 31, 2012, represents a goodwill impairment
charge of $8 billion associated with the Enterprise Services segment and
an intangible asset impairment charge of $1.2 billion associated with
the "Compaq" trade name.
(b) For the period ended July 31, 2012, represents primarily contract-
related charges, including inventory write-downs, related to winding
down certain retail publishing business activities within the Printing
segment.
(c) For the period ended July 31, 2012, adjustments for taxes is net of a
valuation allowance of $823 million provided for certain deferred tax
assets related to the Enterprise Services segment.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Nine Nine
months months
ended Diluted ended Diluted
July 31, earnings July 31, earnings
2013 per share 2012 per share
--------- --------- --------- ---------
GAAP net earnings (loss) $ 3,699 $ 1.89 $ (5,796) $ (2.93)
Non-GAAP adjustments:
Amortization of purchased
intangible assets 1,056 0.54 1,412 0.71
Impairment of goodwill and
purchased intangible
assets(a) - - 9,188 4.65
Restructuring charges 619 0.32 1,888 0.95
Acquisition-related charges 19 0.01 42 0.02
Wind down of non-strategic
businesses(b) - - 72 0.04
Adjustments for taxes(c) (414) (0.21) (1,052) (0.55)
--------- --------- --------- ---------
Non-GAAP net earnings $ 4,979 $ 2.55 $ 5,754 $ 2.89
========= ========= ========= =========
GAAP earnings (loss) from
operations $ 5,208 $ (4,569)
Non-GAAP adjustments:
Amortization of purchased
intangible assets 1,056 1,412
Impairment of goodwill and
purchased intangible
assets(a) - 9,188
Restructuring charges 619 1,888
Acquisition-related charges 19 42
Wind down of non-strategic
businesses(b) - 72
--------- ---------
Non-GAAP earnings from
operations $ 6,902 $ 8,033
========= =========
GAAP operating margin 6% (5%)
Non-GAAP adjustments 2% 14%
--------- ---------
Non-GAAP operating margin 8% 9%
========= =========
(a) For the period ended July 31, 2012, represents a goodwill impairment
charge of $8 billion associated with the Enterprise Services segment and
an intangible asset impairment charge of $1.2 billion associated with
the "Compaq" trade name.
(b) For the period ended July 31, 2012, represents primarily contract-
related charges, including inventory write-downs, related to winding
down certain retail publishing business activities within the Printing
segment net of adjustments to expenses for supplier-related obligations
related to winding down the webOS device business.
(c) For the period ended July 31, 2012, adjustments for taxes is net of a
valuation allowance of $823 million provided for certain deferred tax
assets related to the Enterprise Services segment.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
July 31, October 31,
2013 2012
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 13,251 $ 11,301
Accounts receivable 14,336 16,407
Financing receivables 3,113 3,252
Inventory 6,540 6,317
Other current assets 12,718 13,360
----------- -----------
Total current assets 49,958 50,637
----------- -----------
Property, plant and equipment 11,328 11,954
Long-term financing receivables and other assets 9,913 10,593
Goodwill and purchased intangible assets 34,601 35,584
----------- -----------
Total assets $ 105,800 $ 108,768
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 7,624 $ 6,647
Accounts payable 13,293 13,350
Employee compensation and benefits 4,075 4,058
Taxes on earnings 979 846
Deferred revenue 6,571 7,494
Other accrued liabilities 13,470 14,271
----------- -----------
Total current liabilities 46,012 46,666
----------- -----------
Long-term debt 17,124 21,789
Other liabilities 17,686 17,480
Stockholders' equity:
HP stockholders' equity 24,603 22,436
Non-controlling interests 375 397
----------- -----------
Total stockholders' equity 24,978 22,833
----------- -----------
Total liabilities and stockholders' equity $ 105,800 $ 108,768
=========== ===========
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months Nine months
ended ended
July 31, July 31,
2013 2013
------------ ------------
Cash flows from operating activities:
Net earnings $ 1,390 $ 3,699
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,158 3,491
Stock-based compensation expense 107 398
Provision for bad debt and inventory 48 265
Restructuring charges 81 619
Deferred taxes on earnings 70 542
Excess tax benefit from stock-based
compensation (1) (1)
Other, net 117 343
Changes in operating assets and liabilities:
Accounts and financing receivables 492 2,640
Inventory (585) (445)
Accounts payable 980 (70)
Taxes on earnings (94) (520)
Restructuring (242) (644)
Other assets and liabilities (847) (1,525)
------------ ------------
Net cash provided by operating
activities 2,674 8,792
------------ ------------
Cash flows from investing activities:
Investment in property, plant and equipment (880) (2,280)
Proceeds from sale of property, plant and
equipment 233 507
Purchases of available-for-sale securities
and other investments (296) (793)
Maturities and sales of available-for-sale
securities and other investments 282 874
Payments made in connection with business
acquisitions, net of cash acquired - (167)
------------ ------------
Net cash used in investing activities (661) (1,859)
------------ ------------
Cash flows from financing activities:
Repayment of commercial paper and notes
payable, net (37) (170)
Issuance of debt 55 254
Payment of debt (1,805) (3,473)
Issuance of common stock under employee
stock plans 67 279
Repurchase of common stock (3) (1,053)
Excess tax benefit from stock-based
compensation 1 1
Cash dividends paid (280) (821)
------------ ------------
Net cash used in financing activities (2,002) (4,983)
------------ ------------
Increase in cash and cash equivalents 11 1,950
Cash and cash equivalents at beginning of period 13,240 11,301
------------ ------------
Cash and cash equivalents at end of period $ 13,251 $ 13,251
============ ============
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Three months ended
-------------------------------------
July 31, April 30, July 31,
2013 2013 2012
----------- ----------- -----------
Net revenue:(a)
Personal Systems $ 7,704 $ 7,584 $ 8,636
Printing 5,803 6,081 6,017
----------- ----------- -----------
Total Printing and Personal
Systems Group(b) 13,507 13,665 14,653
Enterprise Group 6,786 6,819 7,492
Enterprise Services 5,843 5,999 6,397
Software 982 941 973
HP Financial Services 879 881 935
Corporate Investments 5 10 11
----------- ----------- -----------
Total segments 28,002 28,315 30,461
Elimination of intersegment net
revenue and other (776) (733) (792)
----------- ----------- -----------
Total HP consolidated net revenue $ 27,226 $ 27,582 $ 29,669
=========== =========== ===========
Earnings before taxes:(a)
Personal Systems $ 228 $ 239 $ 405
Printing 908 958 949
----------- ----------- -----------
Total Printing and Personal
Systems Group(b) 1,136 1,197 1,354
Enterprise Group 1,033 1,082 1,284
Enterprise Services 192 156 240
Software 201 180 175
HP Financial Services 99 97 97
Corporate Investments (58) (56) (57)
----------- ----------- -----------
Total segment earnings from
operations 2,603 2,656 3,093
Corporate and unallocated costs and
eliminations (200) (179) (314)
Unallocated costs related to stock-
based compensation expense (107) (107) (150)
Amortization of purchased
intangible assets (356) (350) (476)
Impairment of goodwill and
purchased intangible assets - - (9,188)
Restructuring charges (81) (408) (1,795)
Acquisition-related charges (4) (11) (3)
Interest and other, net (146) (193) (224)
----------- ----------- -----------
Total HP consolidated earnings
(loss) before taxes $ 1,709 $ 1,408 $ (9,057)
=========== =========== ===========
(a) HP has implemented certain organizational realignments in the first
quarter of fiscal 2013. As a result of these realignments, HP has re-
evaluated its segment financial reporting structure and, effective in
the first quarter of fiscal 2013, created two new financial reporting
segments, the Enterprise Group segment and the Enterprise Services
segment, and eliminated two other financial reporting segments, the
Enterprise Servers, Storage and Networking ("ESSN") segment and the
Services segment. The Enterprise Group segment consists of the business
units within the former ESSN segment and most of the services offerings
of the Technology Services ("TS") business unit, which was previously a
part of the former Services segment. The Enterprise Services segment
consists of the Applications and Business Services ("ABS") and
Infrastructure Technology Outsourcing ("ITO") business units from the
former Services segment, along with the end-user workplace support
services business that was previously a part of the TS business unit.
Taking into account these changes, HP has the following seven financial
reporting segments: Personal Systems, Printing, the Enterprise Group,
Enterprise Services, Software, HP Financial Services and Corporate
Investments.
Also as a result of these realignments, the financial results of the
Personal Systems commercial products support business, which were
previously reported as part of the TS business unit, will now be
reported as part of the Other business unit within the Personal Systems
segment, and the financial results of the portion of the business
intelligence services business that had continued to be reported as part
of the Corporate Investments segment following the implementation of
prior realignment actions will now be reported as part of the ABS
business unit. In addition, the end-user workplace support services
business, which, as noted above, was previously a part of the TS
business unit and will now become a part of the Enterprise Services
segment, will be reported as part of the ITO business unit within that
segment.
To provide improved visibility and comparability, HP has reflected these
changes to its reporting structure in prior financial reporting periods
on an as-if basis, which has resulted in the transfer of revenue and
operating profit among the Personal Systems, the Enterprise Group,
Enterprise Services and Corporate Investments segments. These changes
had no impact on the previously reported financial results for the
Printing, Software or HP Financial Services segments. In addition, none
of these changes impacted HP's previously reported consolidated net
revenue, earnings from operations, net earnings or net earnings per
share.
(b) The Personal Systems segment and the Printing segment are structured
beneath a broader Printing and Personal Systems Group ("PPS"). While PPS
is not a financial reporting segment, HP provides financial data
aggregating the segments within it in order to provide a supplementary
view of its business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Nine months ended
July 31,
------------------------
2013 2012
----------- -----------
Net revenue:(a)
Personal Systems $ 23,492 $ 26,998
Printing 17,810 18,407
----------- -----------
Total Printing and Personal Systems Group(b) 41,302 45,405
Enterprise Group 20,589 22,320
Enterprise Services 17,761 19,257
Software 2,849 2,889
HP Financial Services 2,717 2,853
Corporate Investments 19 48
----------- -----------
Total Segments 85,237 92,772
Elimination of intersegment net revenue and
other (2,070) (2,374)
----------- -----------
Total HP consolidated net revenue $ 83,167 $ 90,398
=========== ===========
Earnings before taxes:(a)
Personal Systems $ 690 $ 1,380
Printing 2,819 2,518
----------- -----------
Total Printing and Personal Systems Group(b) 3,509 3,898
Enterprise Group 3,199 3,965
Enterprise Services 424 622
Software 538 509
HP Financial Services 297 284
Corporate Investments (179) (155)
----------- -----------
Total segment earnings from operations 7,788 9,123
Corporate and unallocated costs and eliminations (488) (670)
Unallocated costs related to stock-based
compensation expense (398) (492)
Amortization of purchased intangible assets (1,056) (1,412)
Impairment of goodwill and purchased intangible
assets - (9,188)
Restructuring charges (619) (1,888)
Acquisition-related charges (19) (42)
Interest and other, net (518) (688)
----------- -----------
Total HP consolidated earnings (loss) before
taxes $ 4,690 $ (5,257)
=========== ===========
(a) HP has implemented certain organizational realignments in the first
quarter of fiscal 2013. As a result of these realignments, HP has re-
evaluated its segment financial reporting structure and, effective in
the first quarter of fiscal 2013, created two new financial reporting
segments, the Enterprise Group segment and the Enterprise Services
segment, and eliminated two other financial reporting segments, the
Enterprise Servers, Storage and Networking ("ESSN") segment and the
Services segment. The Enterprise Group segment consists of the business
units within the former ESSN segment and most of the services offerings
of the Technology Services ("TS") business unit, which was previously a
part of the former Services segment. The Enterprise Services segment
consists of the Applications and Business Services ("ABS") and
Infrastructure Technology Outsourcing ("ITO") business units from the
former Services segment, along with the end-user workplace support
services business that was previously a part of the TS business unit.
Taking into account these changes, HP has the following seven financial
reporting segments: Personal Systems, Printing, the Enterprise Group,
Enterprise Services, Software, HP Financial Services and Corporate
Investments.
Also as a result of these realignments, the financial results of the
Personal Systems commercial products support business, which were
previously reported as part of the TS business unit, will now be
reported as part of the Other business unit within the Personal Systems
segment, and the financial results of the portion of the business
intelligence services business that had continued to be reported as part
of the Corporate Investments segment following the implementation of
prior realignment actions will now be reported as part of the ABS
business unit. In addition, the end-user workplace support services
business, which, as noted above, was previously a part of the TS
business unit and will now become a part of the Enterprise Services
segment, will be reported as part of the ITO business unit within that
segment.
To provide improved visibility and comparability, HP has reflected these
changes to its reporting structure in prior financial reporting periods
on an as-if basis, which has resulted in the transfer of revenue and
operating profit among the Personal Systems, the Enterprise Group,
Enterprise Services and Corporate Investments segments. These changes
had no impact on the previously reported financial results for the
Printing, Software or HP Financial Services segments. In addition, none
of these changes impacted HP's previously reported consolidated net
revenue, earnings from operations, net earnings or net earnings per
share.
(b) The Personal Systems segment and the Printing segment are structured
beneath a broader Printing and Personal Systems Group ("PPS"). While PPS
is not a financial reporting segment, HP provides financial data
aggregating the segments within it in order to provide a supplementary
view of its business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Growth rate
Three months ended (%)
------------------------------- -------------
July 31, April 30, July 31,
2013 2013 2012 Q/Q Y/Y
--------- --------- --------- ----- -----
Net revenue:(a)
Printing and Personal
Systems Group(b)
Personal Systems
Notebooks $ 3,722 $ 3,718 $ 4,416 0% (16%)
Desktops 3,147 3,103 3,486 1% (10%)
Workstations 537 521 526 3% 2%
Other 298 242 208 23% 43%
--------- --------- ---------
Total Personal
Systems 7,704 7,584 8,636 2% (11%)
--------- --------- ---------
Printing
Supplies 3,839 4,122 4,005 (7%) (4%)
Commercial Hardware 1,399 1,398 1,445 0% (3%)
Consumer Hardware 565 561 567 1% 0%
--------- --------- ---------
Total Printing 5,803 6,081 6,017 (5%) (4%)
--------- --------- ---------
Total Printing
and Personal
Systems Group 13,507 13,665 14,653 (1%) (8%)
--------- --------- ---------
Enterprise Group
Industry Standard
Servers 2,851 2,806 3,187 2% (11%)
Technology Services 2,174 2,272 2,349 (4%) (7%)
Storage 833 857 924 (3%) (10%)
Networking 644 618 647 4% 0%
Business Critical
Systems 284 266 385 7% (26%)
--------- --------- ---------
Total Enterprise
Group 6,786 6,819 7,492 0% (9%)
--------- --------- ---------
Enterprise Services
Infrastructure
Technology
Outsourcing 3,662 3,721 3,934 (2%) (7%)
Application and
Business Services 2,181 2,278 2,463 (4%) (11%)
--------- --------- ---------
Total Enterprise
Services 5,843 5,999 6,397 (3%) (9%)
--------- --------- ---------
Software 982 941 973 4% 1%
--------- --------- ---------
HP Financial Services 879 881 935 0% (6%)
--------- --------- ---------
Corporate Investments 5 10 11 (50%) (55%)
--------- --------- ---------
Total segments 28,002 28,315 30,461 (1%) (8%)
--------- --------- ---------
Elimination of
intersegment net
revenue and other (776) (733) (792) 6% (2%)
--------- --------- ---------
Total HP consolidated
net revenue $ 27,226 $ 27,582 $ 29,669 (1%) (8%)
========= ========= ========= ===== =====
(a) HP has implemented certain organizational realignments in the first
quarter of fiscal 2013. As a result of these realignments, HP has re-
evaluated its segment financial reporting structure and, effective in
the first quarter of fiscal 2013, created two new financial reporting
segments, the Enterprise Group segment and the Enterprise Services
segment, and eliminated two other financial reporting segments, the
Enterprise Servers, Storage and Networking ("ESSN") segment and the
Services segment. The Enterprise Group segment consists of the business
units within the former ESSN segment and most of the services offerings
of the Technology Services ("TS") business unit, which was previously a
part of the former Services segment. The Enterprise Services segment
consists of the Applications and Business Services ("ABS") and
Infrastructure Technology Outsourcing ("ITO") business units from the
former Services segment, along with the end-user workplace support
services business that was previously a part of the TS business unit.
Taking into account these changes, HP has the following seven financial
reporting segments: Personal Systems, Printing, the Enterprise Group,
Enterprise Services, Software, HP Financial Services and Corporate
Investments.
Also as a result of these realignments, the financial results of the
Personal Systems commercial products support business, which were
previously reported as part of the TS business unit, will now be
reported as part of the Other business unit within the Personal Systems
segment, and the financial results of the portion of the business
intelligence services business that had continued to be reported as part
of the Corporate Investments segment following the implementation of
prior realignment actions will now be reported as part of the ABS
business unit. In addition, the end-user workplace support services
business, which, as noted above, was previously a part of the TS
business unit and will now become a part of the Enterprise Services
segment, will be reported as part of the ITO business unit within that
segment.
To provide improved visibility and comparability, HP has reflected these
changes to its reporting structure in prior financial reporting periods
on an as-if basis, which has resulted in the transfer of revenue and
operating profit among the Personal Systems, the Enterprise Group,
Enterprise Services and Corporate Investments segments. These changes
had no impact on the previously reported financial results for the
Printing, Software or HP Financial Services segments. In addition, none
of these changes impacted HP's previously reported consolidated net
revenue, earnings from operations, net earnings or net earnings per
share.
(b) The Personal Systems segment and the Printing segment are structured
beneath a broader Printing and Personal Systems Group ("PPS"). While PPS
is not a financial reporting segment, HP provides financial data
aggregating the segments within it in order to provide a supplementary
view of its business.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Nine months ended
July 31,
------------------------
2013 2012
----------- -----------
Net revenue:(a)
Printing and Personal Systems Group(b)
Personal Systems
Notebooks $ 11,568 $ 14,258
Desktops 9,571 10,519
Workstations 1,593 1,598
Other 760 623
----------- -----------
Total Personal Systems 23,492 26,998
----------- -----------
Printing
Supplies 11,854 12,144
Commercial Hardware 4,151 4,413
Consumer Hardware 1,805 1,850
----------- -----------
Total Printing 17,810 18,407
----------- -----------
Total Printing and Personal Systems
Group 41,302 45,405
----------- -----------
Enterprise Group
Industry Standard Servers 8,651 9,445
Technology Services 6,689 6,948
Storage 2,523 2,869
Networking 1,870 1,847
Business Critical Systems 856 1,211
----------- -----------
Total Enterprise Group 20,589 22,320
----------- -----------
Enterprise Services
Infrastructure Technology Outsourcing 11,119 11,868
Application and Business Services 6,642 7,389
----------- -----------
Total Enterprise Services 17,761 19,257
----------- -----------
Software 2,849 2,889
----------- -----------
HP Financial Services 2,717 2,853
----------- -----------
Corporate Investments 19 48
----------- -----------
Total segments 85,237 92,772
----------- -----------
Elimination of intersegment net revenue and
other (2,070) (2,374)
----------- -----------
Total HP consolidated net revenue $ 83,167 $ 90,398
=========== ===========
(a) HP has implemented certain organizational realignments in the first
quarter of fiscal 2013. As a result of these realignments, HP has re-
evaluated its segment financial reporting structure and, effective in
the first quarter of fiscal 2013, created two new financial reporting
segments, the Enterprise Group segment and the Enterprise Services
segment, and eliminated two other financial reporting segments, the
Enterprise Servers, Storage and Networking ("ESSN") segment and the
Services segment. The Enterprise Group segment consists of the business
units within the former ESSN segment and most of the services offerings
of the Technology Services ("TS") business unit, which was previously a
part of the former Services segment. The Enterprise Services segment
consists of the Applications and Business Services ("ABS") and
Infrastructure Technology Outsourcing ("ITO") business units from the
former Services segment, along with the end-user workplace support
services business that was previously a part of the TS business unit.
Taking into account these changes, HP has the following seven financial
reporting segments: Personal Systems, Printing, the Enterprise Group,
Enterprise Services, Software, HP Financial Services and Corporate
Investments.
Also as a result of these realignments, the financial results of the
Personal Systems commercial products support business, which were
previously reported as part of the TS business unit, will now be
reported as part of the Other business unit within the Personal Systems
segment, and the financial results of the portion of the business
intelligence services business that had continued to be reported as part
of the Corporate Investments segment following the implementation of
prior realignment actions will now be reported as part of the ABS
business unit. In addition, the end-user workplace support services
business, which, as noted above, was previously a part of the TS
business unit and will now become a part of the Enterprise Services
segment, will be reported as part of the ITO business unit within that
segment.
To provide improved visibility and comparability, HP has reflected these
changes to its reporting structure in prior financial reporting periods
on an as-if basis, which has resulted in the transfer of revenue and
operating profit among the Personal Systems, the Enterprise Group,
Enterprise Services and Corporate Investments segments. These changes
had no impact on the previously reported financial results for the
Printing, Software or HP Financial Services segments. In addition, none
of these changes impacted HP's previously reported consolidated net
revenue, earnings from operations, net earnings or net earnings per
share.
(b) The Personal Systems segment and the Printing segment are structured
beneath a broader Printing and Personal Systems Group ("PPS"). While PPS
is not a financial reporting segment, HP provides financial data
aggregating the segments within it in order to provide a supplementary
view of its business.
