Hewlett-Packard Company (HPQ)
Q3 2010 Earnings Call Transcript
August 19, 2010 5:00 p.m. ET

Executives

Jim Burns – Vice President of Investor Relations
Catherine A. Lesjak – Executive Vice President, Interim Chief Executive Officer and Chief Financial Officer
Ann M. Livermore – Executive Vice President - HP Enterprise Business
Vyomesh I. Joshi – Executive Vice President - Imaging and Printing Group
Robert Todd Bradley – Executive Vice President - Personal Systems Group

Analysts

Brian Alexander – Raymond James
Benjamin Reitzes – Barclays Capital
Richard Gardner – Citigroup
Keith Bachman – BMO Capital Markets
Kathryn Huberty – Morgan Stanley
Shannon Cross – Cross Research
Scott Craig – Bank of America/Merrill Lynch
Toni Sacconaghi – Sanford C. Bernstein
William Fearnley – Janney Montgomery Scott
Mark Moskowitz – J.P. Morgan
Abhey Lamba – ISI Group
Jeffrey Fidacaro – Susquehanna Financial Group
Aaron Rakers – Stifel Nicolaus
Amit Daryanani – RBC Capital Markets

Presentation

Operator

Good day, ladies and gentlemen and welcome to the third quarter 2010 Hewlett Packard earnings conference call. My name is Michael and I will be your conference moderator for today''s call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. If at any time during the call, you require operator assistance, press star followed by zero and an operator will be happy to assist you. If you would like to ask a question, please press star followed by one. If your question has been answer and you wish to withdraw, please press star followed by two. Press star one to begin. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today''s call, Mr. Jim Burns, Vice President of Investor Relations. Please proceed.

Jim Burns

Good afternoon. Welcome to our third quarter earnings conference call, with Cathie Lesjak, CFO and interim CEO, Bob Bradley from the Personal Systems Group, Ann Livermore from HP''s Enterprise business and VJ, who runs the Imaging and Printing Group. This call is being webcast. A replay of the webcast will be available shortly after the call for approximately one year.

Some information provided during this call may include forward-looking statements that are based on certain assumptions that are subject to a number of risks and uncertainties and actual future results may vary materially. Please refer to the risks described in HP''s SEC reports, including our most recent Form 10-Q.

The financial information discussed in connection with this call, including tax-related items, reflects estimates based on information available at this time and could differ materially from the amounts ultimately reported in HP''s third quarter Form 10-Q.

Earnings, operating margins and similar items at the company level are sometimes expressed on a non-GAAP basis and have been adjusted to exclude certain items including amortization of purchase intangibles, restructuring charges and acquisition-elated charges. The comparable GAAP financial information and a reconciliation of non-GAAP amounts to GAAP are included in the tables and the slide presentation accompanying today''s earnings release, both of which are available on the HP Investor Relations web page at hp.com.

With that I''ll now turn the call over to Cathie.

Catherine A. Lesjak

Good afternoon and thank you for joining us. Q3 was another strong quarter of profitable growth for Hewlett Packard that highlights our consistent broad-based performance. We grew revenue 11%, expanded operating margins 30 basis points versus the prior year and grew non-GAAP EPS by 17% to $1.08.

HP is a trusted partner with strong relationships across its customer base. Our portfolio, made up of hardware, software and services is winning today but more importantly, our customers recognize HP''s position for the future in the data center and converged infrastructure, in connected and mobile devices, in our imaging portfolio and in the breadth of our services offerings.

In Q3, we had balanced geographic performance with revenue in each region growing faster than normal seasonality. Americas was up 12%, EMEA up 9% and Asia Pacific grew 14%. We saw solid growth across both developed and developing economies.

Our Q3 results also demonstrate good balanced growth across IPG, PSG and our enterprise business with solid double digit growth in our hardware businesses. We are capitalizing on commercial spending with ISS revenue up 31%, storage up 10%, ProCurve up 42%, IPG commercial up 28% and PSG commercial up 25%.

Additionally, we experienced strong services signings in the quarter and increased enterprise services hardware revenue pull through by over 50%. On the expense side, we continue to aggressively improve our productivity. We have significant savings still to be captured in our services, supply chain and real estate initiative.