Hewlett-Packard Conference Call Highlights

Hewlett-Packard

reported its third quarter earnings on Friday. Shares of the company are up a mere four percent. Below are some key highlights from its conference call: • In addition, we once again delivered very strong cash flow in the quarter, generating $2.7 billion in cash flow from operations and free cash flow of $1.9 billion. • For the full year, we delivered $9.3 billion in free cash flow, while returning $3.9 billion to shareholders through dividends and share repurchases. • As a result, our balance sheet now stands at an operating company net cash position of $5.9 billion. • A significant improvement from the $11.8 billion of operating company net debt in the first quarter of fiscal 2012. • And we once again achieved earnings per share at the high end of our previously provided outlook, delivering non-GAAP earnings per share of $1.06 for fiscal Q4, up 5% over the prior year and $3.74 of non-GAAP earnings per share for the full year, also up 5%. • We were able to deliver this performance while continuing to invest in the critical innovation that will be the foundation of HP's future. • In fiscal 2014 we increased research and development spending by 10% over the prior year, as we increased investment in every segment, including cloud, infrastructure, 3D printing and of course, the machine. • Fiscal 2014 was a year of significant innovation for HP. • We announced exciting new products and services across our businesses, and as we enter 2015, we have the strongest portfolio we've had in a decade. • Earlier this year, we announced HP Helion, a portfolio of cloud products and services that enable organizations to build, manage and consume workloads in hybrid IT environments. • In the fourth quarter, we continued our momentum in HP Helion with the acquisition of Eucalyptus, a provider of open source software for building private and hybrid enterprise clouds. • Eucalyptus CEO, Martin Mickos, joined HP as a senior vice president and general manager of our cloud business. • We also announced HP OpenNFV, a network function virtualization technology initiative that will help communication service providers accelerate innovation and launch new services faster, more easily and with less expense. • NFV represents one of the most significant shifts in the telecom industry in 20 years and HP is very well positioned to capitalize on this shift. • With open and agile architectures, such as our software defined networking and Helion cloud technologies, we are leading the move away from monolithic purpose-built products. • In May, we announced the latest release of our HP Vertica big data analytics platform, a key component of HAVEn. • It allows customers to store and explore data with the most sophisticated SQL on Hadoop capabilities, combined with advanced analytics and dynamic workload management. • In June, we introduced the HP Apollo family of high performance computing systems capable of delivering up to four times the performance of standard rack servers while using less space and energy. • This includes the Apollo 8000, an industry first liquid cooled supercomputer that combines high level of processing power with ultra low energy usage. • We also extended our converged storage portfolio with a solid state optimized, all flash HP 3PAR StoreServ system. • It delivers performance and low latency without compromising enterprise resiliency or adding data center complexity. Financials: • Total net revenue for the quarter was $28.4 billion, down 2% year-over-year, or 3% in constant currency. Fiscal 2014 net revenue was $111.5 billion, down 1% year-over-year or flat in constant currency. • Gross margin for the quarter was 24.6%, up 1.6 points year-over-year and 0.6 points sequentially. • Over the prior year period, we experienced rate improvements across all of our major business segments, partially offset by competitive pricing in hardware and an unfavorable mix impact on the strength of Personal Systems. • Total non-GAAP operating expenses for the quarter were $4.2 billion, up 4% year-over-year, driven by investments in R&D and go to market. • Sequentially OpEx was down 1%, in line with normal seasonality. Non-GAAP operating profit was $2.7 billion, or 9.6% of revenue, up 0.6 points year-over-year and 1.1 points sequentially. • We repurchased 21.7 million shares in the quarter and paid $309 million in dividends, returning approximately $1.1 billion to shareholders in Q4. For fiscal 2014, we returned approximately $3.9 billion to shareholders in the form of share repurchases and dividends. • This is below the 50% of free cash flow target we laid out at the beginning of the fiscal year and we intend to make up the difference in fiscal 2015.