Thursday, February 24, 2011

HP Printer Comments and Metrics, Q1 2011

First of, my print-related excerpts of the analysts conference call transcript, available at Investor Relations at And then the inclusion of my customary updated metrics table.

From CEO Leo Apotheker’s opening remarks:

[Regarding consumer businesses,] The enthusiasm and anticipation for webOS exceeded even our most optimistic expectations. We look forward to providing a differentiated seamless experience across our tablets, smartphones, printers, PCs, and future form factors.

[As far as top line revenue,] We continued to see good performance in our commercial hardware businesses, led by strength in converged infrastructure and commercial printers and PCs. We posted solid double-digit revenue growth across these businesses, with Enterprise Servers, Storage and Networking growing 22%, and commercial printer hardware and PSG commercial revenue increasing 13% and 11%, respectively.

The Imaging and Printing business delivered strong performance in the first quarter with revenue growth of 7% to $6.6 billion, led by commercial revenue growth of 13% and supplies growth of 7%. Segment operating profit totaled $1.1 billion, or 17% of revenue. Total printer unit shipments increased 13% with commercial and consumer printer units up 33% and 7%, respectively, as we gained market share across all printing categories with particular strength in higher usage segments.

We continue to see solid momentum in our growth initiatives and to lead the market with innovative new products. Our graphic arts business grew double- digits and we are pleased with the momentum in our web press business. Our color laser and multi-function printer units grew 20% and 63%, respectively, while business inkjet unit shipments increased double- digits from the prior year and shipments of wireless printer units more than doubled. In addition, we shipped more than 3 million web-connected printers in the quarter. We will continue to target these markets aggressively, leveraging our technology leadership to drive the shift from analog to digital printing.

Q&A between Aaron Rakers, analyst of Stifel Nicolaus and Cathie Lesjak, HP CFO, and Apotheker – since it was the final question, Apotheker wrapped up the day’s remarks:

Rakers: Yes, thanks, guys. I apologize, I'm going to go back to actually Keith's question earlier. So just to be clear, Cathie, you talked about low single digit growth now in the Services business. I think at the Analyst Day you talked about 2% to 4%. If I do the backwards math, that would be about $700 million, $750 million in revenue shortfall. That leaves you about $1 billion left spread across the segments. I guess my question is, are you still confirming your 7% to 9% growth expectation in Enterprise, Server, Storage and Networking as well as the 3% to 4% growth target for the Imaging and Printing segment for fiscal 2011? Thank you.

Lesjak: So, Aaron, on earnings calls, we don't typically update our guidance relative to the segments. I've laid out for you, or we've laid out for you, the guidance for Q2 and a full fiscal year from a revenue perspective. I don't have anything more to add to that.

Apotheker: So this is -- let me just wrap this call up by sharing with you some final thoughts. HP delivered strong margins, earnings and cash flow performance in the quarter and our operational discipline is intact. We continue to show strength in our core markets. We're winning in the data center, we're capturing the share of the printed pages moving from analog to digital and we're well positioned as the world of cloud and connectivity converge. As we discussed, we have some work to do in a couple of areas and I'm confident in our ability to execute our plan. I look forward to sharing more of our strategy with you at our March 14 Summit.


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