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IT SERVICES

Analysis of Hewlett Packard Services (HPS) Fourth Quarter Results

Strong Finish Not Enough

HP Stock Gives Up Its Earnings Announcement Gains

PHOENIX, November 20 – Hewlett Packard (HP) ended its fiscal year 2003 with a bang.  Revenues grew in double digits (up 10% to $20 billion), while earnings more than doubled in its fourth quarter ($862 million vs. $390 million in FY02).  Both figures exceeded Wall Street’s expectations.

No wonder the HP shares rose 2.4% in after-hours trading that followed the earnings announcement.  They had also jumped nearly three points earlier the same day (November 19).

But that’s all she wrote.  For, the following day (November 20), the HP stock dropped to $21.59 - below the level it had traded before the earnings release. 

[snip]

Balanced Performance

Services.  Hewlett Packard Services (HPS), for example, grew its revenues by 5%, both sequentially and over the last 12 months.  The $3.23 billion fourth quarter revenue was also its best during the current fiscal year.

[snip]

Hardware.  Among the HP hardware units, as usual, the Imaging and Printing group was the best performer.  Its fiscal year 2003 revenues grew by 11% to $22.6 billion, while its operating profit jumped to $3.6 billion, for a 15.8% operating margin.

[snip]

The PC unit also eked out a small profit in the fourth quarter ($21 million), following a $56 million loss in the previous three-month period.  This means that for the full year, the HP PC unit has earned $19 million – for a 0.09% operating margin. 

Even such minuscule margin, of course, beats the losses that the Big Blue PC unit keeps piling on nearly every quarter on revenues half the HP PC’s size. 

Makes you wonder why some of these companies stay in the PC business, doesn’t it?  Probably because somebody has to… (besides Dell, of course).  Or does it?

[snip]

"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, and who are now reading the complete Annex Bulletin (7 pages in print edition), along with all charts which back up our story.

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Happy bargain hunting!

Bob Djurdjevic

For additional Annex Research reports, check out... 

2003 HP: "An HP Hat Trick (March 2003);   EXCERPTS - Analysis of Hewlett Packard Services FY02 results (May 2003);  2003 Global IT Services Heptathlon (May 23, 2003)Analysis of “Top 10” IT Leaders’ Market and Business (June 2003)

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Volume XIX, No. 2003-20
November 20, 2003

Editor: Bob Djurdjevic
Published by Annex Research
e-mail: annex@djurdjevic.com

P.O. Box 97100, Phoenix, Arizona 85060-7100
TEL/FAX: (602) 824-8111

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