<%@ LANGUAGE=VBScript %> <% Set asplObj=Server.CreateObject("ASPL.Login") asplObj.Protect Set asplObj=Nothing %> Excerpts from analysis of HP 4Q07 results (Nov 19, 2007)

Annex Bulletin 2007-43                            November 19 , 2007

Excerpts from CONFIDENTIAL CLIENT edition (Annex clients click here)

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Biggest Gets Bigger, Better (Analysis of HP's 4Q07 business results) [Annex clients click here]

Unplugged (without notice) (An editorial on internet service quality)

INDUSTRY TRENDS

Updated 11/19/07, 10:50PM PDT

Analysis of Hewlett Packard's Fourth Quarter Business Results

Biggest Gets Bigger, Better

HP Again Exceeds Expectations with Double Digit Earnings, Revenue Growth

PCs, Emerging Markets, Software Explode; All Segments Grow

SCOTTSDALE, Nov 19 - One year ago, Hewlett Packard (HP) became the new "king of the hill" of the IT industry, having surpassed Big Blue in total revenues ($91.7 billion vs. $90 billion - see "New King of the Hill," Nov 2006).  Today, HP widened its lead over IBM, as its fiscal year 2007 revenues surged 15% to $104.3, up 14% since a year ago.  IBM revenues for the last four quarters were $96.7 billion, up 6.6%, less than half the HP growth rate.

HP's $28.3 billion-fourth quarter blew the Wall Street revenue forecasts right out of water, exceeding them by a cool $1 billion.  Even better news for the company's shareholders was that the bottom line surged by double the top line's growth rate.  Net earnings were up 28% in the fourth quarter to $2.2 billion.  For the full fiscal year 2007, HP earned $8 billion, up 17% from the year before. 

[snip & charts here]

Business Segment Analysis

HP also finished the year in style, displaying balanced performances across its businesses and geographies.  HP revenues jumped in double digits in ALL of its  global markets (up 10% in the Americas; up 19% in Europe; up 20% in A/P - see the left chart).

But the most impressive performance was again delivered by the PC unit, and by the emerging markets like China, where the business more than doubled.  Overall, revenues in the BRIC countries (Brazil, Russia, India and China) surged by 37% in the fourth quarter.  They now account for 9% of HP total.  Non-U.S. business now represents two-thirds of the HP worldwide revenues.

[snip]

Summary & Outlook

Looking ahead to fiscal year 2008, HP sees no signs of its growth slowing down.  The company is expecting about a 7% revenue increase to $111.5 billion, and again a twice as rapid profit improvement (up about 14%) to about $3.35 per share. 

It is clear that HP's focus on consumer markets and the related PC and printer/imaging products has sheltered it from the financial carnage at the high-end of the corporate market where Big Blue tends to hold fort.  So until such time that enough blood-letting in the financial sector starts to wane, or IBM changes its strategic tack toward the lower segments of its customer pyramid, HP is likely to continue to gain ground on the former industry leader and on most of the rest of the major IT players.

[snip & charts here]

Whatever the actual fair market value may be right now, the fact is, HP shares have risen 138% since Mark Hurd took over in April 2005.  And that's another measurement of improved business quality that supplements the company's title as the largest IT company in the world. 

Biggest gets bigger, better... that's HP today.

For a detailed HP 4Q07 and full year 2007 P&Ls, Annex clients click here

[snip]

"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, who are now reading the complete Annex Bulletin, along with many tables and charts that back up our forecast.  

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Bob Djurdjevic

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Volume XXIII, Annex Bulletin 2007-43
November 19, 2007

Bob Djurdjevic, Editor
(c) Copyright 2007 by Annex Research, Inc. All rights reserved.
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