Hewlett-Packard (HPQ $22.60 +1.52) reported second quarter earnings of $0.98 per share, $0.07 better than the Capital IQ consensus of $0.91, while revenues fell 3.0% year/year to $30.69 bln vs the $29.91 bln consensus. Hewlett-Packard launches multi-tear restructuring to fuel innovation and enable investment; expects to save $3.0-3.5 bln exiting FY14. Co issues downside guidance for Q3, sees EPS of $0.94-0.97, excluding non-recurring items, vs. $1.02 Capital IQ Consensus Estimate. Co issues upside guidance for FY12, sees EPS of $4.05-4.10, excluding non-recurring items, vs. $4.04 Capital IQ Consensus Estimate and at least $4.00 previously.
Q2: Personal Systems Group (PSG) revenue was flat year over year with a 5.5% operating margin. Commercial revenue increased 3%, and Consumer revenue declined 4% while Workstations revenue was down 1% YoY. Desktop units were up 5%, notebook units were down 6% and total units were down 1%. Services revenue declined 1% YoY with an 11.3% operating margin. Technology Services revenue was flat YoY, Application and Business Services revenue grew 1% and IT Outsourcing revenue declined 3% YoY. Imaging and Printing Group (IPG) revenue declined 10% YoY with a 13.2% operating margin. Commercial hardware revenue was down 4% YoY with commercial printer units down 7%. Consumer hardware revenue was down 15% YoY with a 13% decline in printer units. Enterprise Servers, Storage and Networking (ESSN) revenue declined 6% YoY 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% YoY. HP Financial Services revenue grew 9% YoY 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% YoY 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.
The company also 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 co. 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 co, or 8.0% of its workforce as of Oct. 31, 2011, by the end of fiscal year 2014. The co 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. 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.