This, however, may be the best part: "These moves are expected to yield significant improvements in efficiency and customer service during the next several years." Really? Better service with 27,000 fewer people, and a lower overall morale? That's some pretty good spin. Strangely, the cost savings is somehow supposed to "boost investment in innovation around its three areas of strategic focus: cloud, big data and security, as well as in other segments that offer attractive growth potential." Call us crazy, but we thought people innovated, not cost savings. Hmm.
The job cuts are expected to be fully realized by 2014, and to HP's credit, they are offering an early retirement program, so the total number of employees affected will be impacted by the number of employees that participate in the early retirement plan. The full report is below, and aside from that massive amount of cash they earned this quarter, the rest of it is pretty dreary news.
HP Launches Multi-Year Restructuring to Fuel Innovation and Enable Investment
PALO ALTO, CA, May 23, 2012 (MARKETWIRE via COMTEX) -- HP HPQ +5.55% today outlined plans for a multi-year productivity initiative designed to simplify business processes, advance innovation and deliver better results for customers, employees and shareholders.
The restructuring is expected to generate annualized savings in the range of $3.0 to $3.5 billion exiting fiscal year 2014, of which the majority will be reinvested back into the company. Enabling investments in people, processes and technology will allow HP to accomplish the restructuring effort and to generate the savings. These moves are expected to yield significant improvements in efficiency and customer service during the next several years. HP expects to use the savings to boost investment in innovation around its three areas of strategic focus: cloud, big data and security, as well as in other segments that offer attractive growth potential.
As part of the restructuring, HP expects approximately 27,000 employees to exit the company, or 8.0% of its workforce as of Oct. 31, 2011, by the end of fiscal year 2014. The company is offering an early retirement program, so the total number of employees affected will be impacted by the number of employees that participate in the early retirement plan. Workforce reduction plans will vary by country, based on local legal requirements and consultation with works councils and employee representatives, as appropriate.
In addition to these restructuring actions, HP expects to achieve additional savings from non-headcount cost reductions, including supply chain optimization, SKU and platform rationalization, go-to-market strategy simplification and business process improvement.
"These initiatives build upon our recent organizational realignment, and will further streamline our operations, improve our processes, and remove complexity from our business," said Meg Whitman, HP president and chief executive officer. "While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long term health of the company. We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholders."
HP expects to reinvest savings in each of its business segments to strengthen their ability to stay ahead of customer expectations and capitalize on growing market trends.
HP Reports Second Quarter 2012 Results-- Second quarter non-GAAP diluted earnings per share of $0.98, above previously provided outlook of $0.88 to $0.91 per share -- Second quarter GAAP diluted earnings per share of $0.80, above previously provided outlook of $0.68 to $0.71 per share -- Second quarter net revenue of $30.7 billion, down 3% from the prior-year period -- Returned $601 million in cash to shareholders in the form of dividends and share repurchases -- Company announces multi-year restructuring to fuel innovation and enable investment -- see separate press release for details
HP second quarter fiscal 2012 financial performanceQ2 FY12 Q2 FY11 Y/YGAAP net revenue ($B) $30.7 $31.6 (3%)GAAP operating margin 7.2% 9.4% (2.2 pts.)GAAP net earnings ($B) $1.6 $2.3 (31%)GAAP diluted EPS $0.80 $1.05 (24%)Non-GAAP operating margin 8.9% 11.3% (2.4 pts.)Non-GAAP net earnings ($B) $1.9 $2.7 (28%)Non-GAAP diluted EPS $0.98 $1.24 (21%)
Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.
HP HPQ +5.74% today announced financial results for its second fiscal quarter ended April 30, 2012. For the quarter, net revenue of $30.7 billion was down 3% year over year both as reported and when adjusted for the effects of currency.
GAAP diluted earnings per share (EPS) was $0.80, down 24% from the prior-year period. Non-GAAP diluted EPS was $0.98, down 21% from the prior-year period. Second quarter non-GAAP earnings information excludes after-tax costs of $356 million, or $0.18 per diluted share, related to amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
"We are making progress in our multi-year effort to make HP simpler, more efficient and better for customers, employees, and shareholders," said Meg Whitman, HP president and chief executive officer. "This quarter we exceeded our previously provided outlook and are executing against our strategy, but we still have a lot of work to do."
Business Group Results-- Personal Systems Group(PSG) revenue was flat year over year with a 5.5%operating margin. Commercial revenue increased 3%, and Consumer revenuedeclined 4% while Workstations revenue was down 1% year over year. Desktopunits were up 5%, notebook units were down 6% and total units were down 1%.-- Services revenue declined 1% year over year with an 11.3% operating margin. Technology Services revenue was flat year over year, Application and Business Services revenue grew 1% and IT Outsourcing revenue declined 3% year over year.-- Imaging and Printing Group (IPG) revenue declined 10% year over year with a13.2% operating margin. Commercial hardware revenue was down 4% year over year with commercial printer units down 7%. Consumer hardware revenue was down 15%year over year with a 13% decline in printer units.-- Enterprise Servers, Storage and Networking (ESSN) revenue declined 6% year over year with an 11.2% operating margin. Networking revenue was up 2%, Industry Standard Servers revenue was down 6%, Business Critical Systems revenue was down 23%, and Storage revenue was up 1% year over year.-- HP Financial Services revenue grew 9% year over year driven by a 4% increase in net portfolio assets and a 5% increase in financing volume. The business delivered a 9.9% operating margin.-- Software revenue grew 22% year over year with a 17.7% operating margin, including the results of Autonomy. Software revenue was driven by 7% license growth, 17% support growth, and 72% growth in services. Autonomy saw a significant decline in license revenue.
To help improve Autonomy's performance, Bill Veghte, HP's chief strategy officer and executive vice president of HP Software, will step in to lead Autonomy. Veghte is an experienced software leader who will help develop the right processes and discipline to scale Autonomy and fulfill its promise. Mike Lynch, Autonomy's founder and executive vice president for Information Management, will leave HP after a transition period. The market and competitive positioning for Autonomy remain strong, particularly in cloud offerings.
Asset Management HP generated $2.5 billion in cash flow from operations in the second quarter. Inventory ended the quarter at $7.3 billion, with days of inventory up 2 days year over year to 28 days. Accounts receivable of $16.6 billion was down 4 days year over year to 49 days. Accounts payable ended the quarter at $12.9 billion, down 5 days from the prior-year period to 49 days. HP's dividend payment of $0.12 per share in the second quarter resulted in cash usage of $251 million. HP also utilized $350 million of cash during the quarter to repurchase approximately 13 million shares of common stock in the open market. HP exited the quarter with $8.7 billion in gross cash.
Outlook In connection with the restructuring efforts discussed in a separate press release issued today ( http://www8.hp.com/us/en/hp-news/press-release.html?id=1247078 ), HP expects to record a pre-tax charge of approximately $1.7 billion in fiscal 2012 that will be included in its GAAP financial results for that period. Of that amount, HP expects to record a pre-tax charge of approximately $1.0 billion in its third fiscal quarter. The cash impact associated with the restructuring efforts is expected to be approximately $400 million in fiscal year 2012. Through fiscal 2014, HP expects to record additional pre-tax charges approximating $1.8 billion that will be included in its GAAP financial results for the applicable periods.
In May 2012, HP committed to a change in its PC branding strategy. As a result, HP has commenced an asset impairment analysis to determine the current value of the Compaq trade name acquired in 2002. Based on the preliminary results of that analysis, HP expects to record an impairment charge of up to approximately $1.2 billion that will be included in its GAAP financial results for its third fiscal quarter. There will be no cash impact associated with the impairment charge.
For the third quarter of fiscal 2012, HP estimates non-GAAP diluted EPS to be in the range of $0.94 to $0.97 and GAAP diluted EPS to be in the range of $0.00 to $0.03.
Third quarter fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.94 per share, related primarily to the amortization and impairment of purchased intangible assets, restructuring charges, and acquisition-related charges.
For the full year fiscal 2012, HP now estimates non-GAAP diluted EPS to be in the range of $4.05 to $4.10 and GAAP diluted EPS to be in the range of $2.25 to $2.30.
Full year fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.80 per share, related primarily to the amortization and impairment of purchased intangible assets, restructuring charges and acquisition-related charges.
More information on HP's quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations website at www.hp.com/investor/home .
HP's Q2 FY12 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2012q2webcast.