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In the after-hours of Tuesday, Hewlett-Packard (NYSE:HPQ) announced its earnings for the past quarter. The company's net income of $1.01 (non-GAAP) was mostly in line with the expectations while its revenue of $29.1 billion was above the expectations of analysts who were looking for $28 billion. The investors mostly cheered this report as the company's share price was rallying in the after-hours of Tuesday.

HP's revenue was down 3% compared to the same quarter of last year; however, most of this was due to the currency fluctuations. Excluding the effects of currency, HP's revenue was down by 1% year-to-year.

For the full-year, HP generated $112.3 billion in revenues and earned $2.62 per share (or $3.56 in non-GAAP measures). The company's revenue for 2013 fiscal year represents a decline of 7% (or 5% after excluding currency effects) compared to the fiscal year of 2012. Cash flow from operations was up from $10.6 billion to $11.6 billion for the full-year, but it was down from $4.1 billion to $2.8 billion for the quarter.

This marks the seventh quarter in a row that HP was able to improve its net debt position by $1 billion or more. Under the management of Meg Whitman, HP has been doing a great job of improving its balance sheet. Furthermore, between 2012 and 2013, HP's operating margin rose from negative 9.2% to positive 6.4%, marking an improvement of 15.6%.

If we look at HP's results by segment, some segments look like they are in better shape than others but this is to be expected. HP's Personal Systems segment, which is responsible for producing and selling computers and related hardware to consumers and businesses, saw a 2% decline year-to-year. While the business sales increased by 4%, the revenue generated from consumers fell by 10%. This is not surprising, given that consumers are shifting from computers to tablets while businesses and institutions still can't get enough processing power from tablets, so they will continue to stick with computers. This segment reported an operating margin of 3.0%.

HP's Printing segment continues to carry strong margins, as this segment's operating margin in the quarter was 17.7%. This is one of the areas where HP's strength continues to lay. HP increased its commercial hardware revenues by 9% while the company's supply revenue (replacement ink and printing papers) was down by 4%.

HP's Enterprise Group, which is responsible for selling IT solutions to businesses, saw its revenues rise by 2% compared to the same quarter a year ago. Industry Standard Servers sub-segment was the biggest growth generator in this segment, as it grew by 10% while Networking revenue rose by 3%. HP's Business Critical Systems sub-segment reported a revenue decline of 17% and Technology Services saw its revenues fall by 6%. The company's Storage segment posted a modest growth of 1%. The operating margin of this segment was 14.5%.

Without a doubt, HP's business segment with the highest margin is Software. This segment posted an operating profit of 30.8% for the quarter. Despite strong margins, HP's Software business continued to bleed in terms of revenue generation. This segment reported a drop of 9% in revenues. The biggest decline came from license revenue (down 24%) and the biggest increase came from software-as-a-service (up 15%).

Finally, HP's Financial Services segment, which is responsible for providing financing to buyers of HP's products (mostly computers and printers), saw its revenues fall by 6% in addition to a 5% decrease in net assets. This business segment had an operating margin of 11.2%.

For the current fiscal year, HP expects its non-GAAP earnings to be between $3.55 and $3.75 while the GAAP net income is expected to be somewhere from $2.85 to $3.05. The difference between the GAAP and non-GAAP figures consists of amortization of intangible assets and certain charges related to the company's restructuring project that are expected to occur in the current fiscal year.

Have you noticed the company hasn't had any major write-offs in the last year? When HP announced a major write-off last year, many people were worried that it would continue to make bad acquisitions but the company's bad habit of making bad acquisitions seems to have come to an end. This is one of the reasons HP's balance sheet continues to improve. As long as the company stays away from useless spending, its balance sheet will improve further, and it will be able to return more money to shareholders.

Speaking of HP's balance sheet, the company currently has $12.16 billion in cash, up from $11.30 billion last year, $16.61 billion in long-term debt, down from $21.79 billion and $5.98 in short-term debt, down from $6.65 billion. Basically, HP's cash position improved by nearly $1 billion while the company's debt continued to shrink since last year.

Regardless, this is a tough time for Hewlett-Packard and the company is going through a time where the global PC market keeps declining at a double-digit rate each year. In the enterprise market, there is a lot of competition and this space is getting pretty crowded. On the other hand, HP has been proving to us that it is able to cruise through hard times and still remain highly profitable. The company continues to be a cash cow with an improving balance sheet.

So what do we do with HP after the earnings report? Currently, HP's market value is about $48 billion and the company has $12.16 billion in cash. Excluding this figure, HP will be looking at a P/E ratio of 10 for the current fiscal year. This P/E ratio assumes no growth for the company. Keep in mind that the company's price to cash flow ratio of 12 makes it possible for future dividend increases. At the current rate, HP's dividend yield will be 2.31% even though it could easily support a 30% increase with its current cash flow. As HP's balance sheet improves further, there is no reason why it shouldn't have a dividend increase.

In a market that's highly inflated by the Fed's generous monetary policy, it is hard to find true value plays. HP might be one of the few value plays left in the market. Meg Whitman's team has been very successful with turning the company around and the company has made a lot of progress even in the face of a rapidly declining PC market. Moving forward, things should improve for the investors of HP unless we see a major market correction. Since this stock is pretty volatile, it is also a good candidate for buying and writing covered calls. It's done wonders for me in the past, and at times, I was able to get monthly yields as high as 3-4% out of this company, which is very rare for blue chips.

Source: What To Do With Hewlett-Packard After The Earnings Report