Palo Alto, CA, U.S.-based HP reported financial results for its third fiscal quarter ended July 31, 2003. Third-quarter revenue totaled U.S. $17.35 billion, compared to $16.54 billion in the prior year period. Revenues increased 5 percent year-over-year, but declined 4 percent sequentially reflecting business seasonality, the company reported.
Non-GAAP operating profit totaled $858 million for the quarter, up 61 percent year-over-year, and down 25 percent sequentially. Non-GAAP operating profit was 4.9 percent of revenue, up from 3.2 percent of revenue in the prior year period, and down from 6.4 percent in the second quarter.
Non-GAAP diluted earnings per share (EPS) was $0.23 for the quarter, up from $0.14 year-over-year, and down from $0.29 sequentially. Non-GAAP diluted EPS and non-GAAP net earnings reflect a $403 million adjustment on an after- tax basis, or $0.13 per diluted share. The pre-tax adjustment includes $376 million of restructuring charges, $141 million in amortization of purchased intangible assets, and $40 million for various acquisition-related items. All non-GAAP financial information in this release is reconciled in the table below titled: "Non-GAAP Consolidated Condensed Statement of Earnings."
GAAP operating profit for the quarter was $301 million, or 1.7 percent of revenue, up from a loss of 15 percent of revenue in the prior year period and down from 3.6 percent sequentially. GAAP diluted EPS was $0.10 per share.
"The third quarter is always tough, but we still should have done better," said Carly Fiorina, HP chairman and CEO. "Nevertheless, we are confident in our strategy and the actions we're taking. We expect to deliver a strong fourth quarter with every one of our businesses profitable," she added.
"Our challenge in the Personal Systems business continues to be desktops, particularly in the U.S., where reduced volumes due to seasonality, and in some cases, our own overly aggressive pricing actions negatively impacted gross margins. We've already taken corrective pricing actions, and will return this business to profitability in Q4," Ms. Fiorina said. "Meanwhile, we continued to widen our market leadership in notebooks, the fastest-growing and most profitable segment of the PC market. Notebooks remained profitable for the quarter, growing revenue 27 percent year- over-year, faster than our nearest competitor, and gaining 1.4 percentage points of share sequentially.
"Imaging and Printing had a good quarter with revenue growth of 10 percent year-over-year, outpacing competitors. As planned, profit returned to more normal levels, with expenses up 20 percent year-over-year as we continued to invest in R&D, product rollovers and marketing to extend our leadership in this business. Our recent consumer launch of 158 digital imaging and entertainment products has been extremely well received," she continued.
"In our enterprise business, it was another strong quarter for Superdome shipments, with revenues up 64 percent over the same period last year. Unit shipments of industry standard servers grew 16 percent year-over-year, with a record third quarter in the U.S. and our strongest ever worldwide quarter. HP's performance in mid-range and low- end UNIX servers, however, was weak, as was the company's overall enterprise performance in Europe and Japan. We continued to make good progress on our cost structure, and acted more aggressively to reduce headcount than originally planned. This field restructuring, while the right decision for the long-term and now behind us, had an impact on revenue. The enterprise business will be profitable in Q4," Ms. Fiorina said.
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