H-P, Fade to Black (HPQ, CSCO, IBM, DELL)

Hewlett-Packard Company (NYSE: HPQ) keeps beating and raising estimates.  The PC and technology giant just reported earnings of $1.09 in non-GAAP EPS on revenues of $30.85 billion.  Thomson Reuters had estimates at $1.05 EPS and $29.82 billion in revenues.  Unfortunately, it looks like some of the whispers and unofficial expectations might have even been higher than the company’s raw earnings report. The biggest takeaway here is that H-P is now getting positioned to look almost exactly like a hybrid cross-breed of the new Cisco Systems, Inc. (NASDAQ: CSCO) and the old operations of IBM (NYSE: IBM).  This report will also set the tone for Dell Inc. (NASDAQ: DELL) and its earnings on deck this week.  Either way, H-P shares saw a reversal of fortune in the after-hours session that could go either tomorrow depending upon market issues.

The biggest On a net basis, the final GAAP EPS was $0.91.  H-P is putting out some questionable guidance as it sees 3Q results of $0.87 to $0.89 net EPS, but adjusted earnings will be $1.05 to $1.07 EPS on revenues of $29.7B to $30.0B.  Thomson Reuters has estimates of $1.07 EPS and $29.72 billion in revenues.

For the year, HP sees $3.76 to $3.81 EPS net EPS on an 8% to 9% gain in revenues.  The prior estimate was $3,79 to $3.86 EPS.  On an adjusted earnings basis, HP is Raising guidance to $4.45 to $4.50 EPS vs. a prior target of $4.37 to $4.44 EPS.

In the last quarter, Cash Flow from operations was $3.1 billion and its inventory end was $6.4 billion.  Accounts receivable ended at $14.8 billion, down 5-days from a year ago.  In the quarter,m it spent $1.8 billion buying back shares and purchase 35 million shares in total.  Non-GAAP operating margin was 11%.

The breakdown was a s follows:

• Services revenues were $8.7B, UP 2%
• Enterprise Storage & Servers revenues were $4.5B, UP 31%
• Software revenues were $871M, DOWN 1%
• Personal Systems Group revenues were $10.0B, UP 21%
• Imaging & Printing Group revenues were $6.4B, UP 8%
• Financial Services revenues were $755M, UP 18%

ProCurve revenue increased 31%, and HP Networking overall increased 58% year-over-year including the impact of the 3Com acquisition.

H-P shares closed down 1.5% at $46.79.  Shares were soft on the report’s initial move by 2% but it now looks like H-P shares are up 2% in the after-hours session at $47.80.  Dell closed down 1.45% at $15.00 today, and its shares are now up 0.6% at $15.09 in the after-hours session.

JON C. OGG