HP posts revenue increase, raises forecast

21-05-2008

by Bryan Collins

Hewlett-Packard saw revenue jump just under 10 percent during the firm's second fiscal quarter.

Revenue for the three-month period amounted to USD28.3 billion, up from USD25.5 billion during the same period a year ago.

HP also took the time to officially announce it is to purchase EDS at a price of USD25 per share. This equals an enterprise value of approximately USD13.9 billion. The terms of the transaction have been unanimously approved by HP and the EDS board of directors. The new HP-owned business group will remain branded EDS and headquartered at EDS's existing offices in Plano, Texas.

"The combination of HP and EDS will create a leading force in global IT services," said HP's chairman and chief executive officer, Mark Hurd. "Together, we will be a stronger business partner, delivering customers the broadest, most competitive portfolio of products and services in the industry. This reinforces our commitment to help customers manage and transform their technology to achieve better results."

The two companies' collective services businesses, at the end of their fiscal year last year, had annual revenues of more than USD38 billion. Over 210,000 employees work with the companies in more than 80 countries. HP anticipates that the transaction will be accretive to fiscal 2009 non-GAAP earnings and accretive to 2010 GAAP earnings. The PC manufacturing giant also believes the transaction will more than double HP revenue from services.

HP's second quarter results showed GAAP diluted earnings per share (EPS) were USD0.80 and non-GAAP diluted EPS were USD0.87, compared with second quarter fiscal 2007 GAAP diluted EPS of USD0.65 and non-GAAP diluted EPS of USD0.70. The company cited a solid performance across all business segments as well as a strong cash flow from operations.

HP estimates full-year revenue will be approximately USD114.2 billion to USD114.4 billion, up from its previous estimate of USD113.5 billion to USD114 billion. It also figures diluted EPS will be USD3.30 to USD3.34

The computer company issued its preliminary GAAP earnings announcement to facilitate communications with investors about its merger agreement to acquire EDS. It said that the rest-of-year estimates do not reflect the potential impact of the EDS acquisition.

"This is a great transaction for our stockholders, providing tremendous value in the form of a significant premium to our stock price. It's also beneficial to our customers, as the combination of our two global companies and the collective skills of our employees will drive innovation and enhance value for them in a wide range of industries," said EDS chairman, president and chief executive officer Ronald Rittenmeyer.