PC growth drives H-P's revenue beat; guidance in-line

H-P (NYSE:HPQ) is guiding for FQ4 EPS of $1.03-$1.07, in-line with a $1.05 consensus.

PC sales rose 12% Y/Y in FQ3 to $8.6B, better than FQ2's 7% growth and fueling the revenue beat. Commercial PCs +14%, consumer +8%. Also helping: enterprise hardware division sales rose 2% to $6.9B, a turnaround from FQ2's 2% drop.

Enterprise services remains weak, falling 6% to $5.6B after dropping 7% in FQ2. Software -5% to $959M, worse than FQ2's flat growth. Printers -4% to $5.6B, an even decline with FQ2. Financial services -3% to $855M, after dropping 2% in FQ2.

A mix shift towards PCs appears to have pressured EPS. The PC division has only a 4% op. margin, lower than H-P's total non-GAAP op. margin of 8.5%.

Printing hardware units and supplies revenue both fell 5%. x86 server revenue +9%, mission-critical servers -18% (Itanium weakness), storage -4%, networking +4%. Software license revenue (high-margin) fell a steep 16%.

GAAP gross margin rose 70 bps Y/Y to 24%. SG&A spend +3% to $3.4B; R&D +11% to $887M. $582M was spent on buybacks.

HPQ -1.1% AH. FQ3 results, PR.

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Comments (2)
  • Philip Marlowe
    , contributor
    Comments (1597) | Send Message
    Unsurprisingly, the strongest sector was x86 servers. If there only was a company that made mostly x86 servers .... Oh wait there is: SMCI.
    20 Aug 2014, 04:29 PM Reply Like
  • mr20007
    , contributor
    Comment (1) | Send Message
    The x86 server revenue growth of 9% is notable. IBM announcement earlier to sell its x86 business to Lenova has opened up the window of opportunity for HP to win many of the x86 server refresh. HP also has announced several innovative server technologies that has contributed to its impressive growth.
    20 Aug 2014, 05:11 PM Reply Like
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