HP's Q2 earnings reach US$20.1B

Hewlett-Packard on Tuesday announced its second-quarter 2004 financial results, including revenue of US$20.1 billion, an increase of 12 per cent over last year's Q2 revenue of US$18 billion.

In an announcement after the financial markets closed today, HP said it posted net income of US$1.1 billion on a Generally Accepted Accounting Principles (GAAP) basis, compared with a non-GAAP operating profit of US$1.3 billion.

The US$20.1 billion in revenue is the highest revenue figure HP has ever recorded for one quarter, according to the company.

GAAP net earnings per share are 29 cents for both diluted and basic shares for the quarter, while non-GAAP earnings per share totaled 34 cents for both basic and diluted shares.

Both GAAP and non-GAAP earnings figures include a US$70 million charge for HP's settlement with the Canadian government concerning a dispute over contracts between the two parties. Last week, HP Canada agreed to reimburse US$105 million to the Canadian government in the case. That settlement had an impact of approximately 2 cents per share on second-quarter GAAP and non-GAAP earnings.

The settlement allowed the company to settle a dispute related to IT contracts it took on when it acquired Compaq Computer Corp. In March, Canada's Department of National Defence claimed that it had been bilked out of the money by a contract-invoicing scam involving payments that were supposedly being made to subcontractors.

HP said there was no evidence that any of its employees derived illegal benefits from the alleged scheme. But the company said last week that it decided "to honor its contractual obligations, rather than engage in protracted litigation."

Carly Fiorina, HP chairman and CEO, said in a statement today that the company "delivered a strong quarter with solid revenue gains and continued profitability across the portfolio. We surpassed US$20 billion in quarterly revenue for the first time in our history, with record second quarter revenue in PCs, enterprise hardware, software, services and imaging and printing.

"Cash flow from operations totaled US$2.6 billion," Fiorina said. "These results demonstrate that we are winning and growing across the portfolio in an intensely competitive market."

By department, HP's revenue in personal computer systems grew 17 per cent over last year, while services revenue grew by 15 per cent, and imaging and printing revenue was up 11 per cent. Enterprise storage and servers revenue rose by 8 per cent, while software revenue jumped 23 per cent, according to the company.

HP also announced its guidance for the second half of the year, raising its second-half 2004 revenue estimates to a range of US$39.7 billion to US$40.7 billion. Current analyst estimates are US$39.7 billion.

HP is also expecting non-GAAP earnings per share of 74 cents during the second half of the year.

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