HP Misses Target for EPS; Scraps PWC Deal

Hewlett-Packard Company Monday reported a 17 percent increase during its fourth
quarter. The company’s net revenue stands at $13.3 billion, compared with
$11.4 billion in last year’s fourth quarter.

The computing systems segment — a broad range of Internet infrastructure
systems and solutions for businesses and consumers — showed strong growth.
During the fiscal year, HP saw revenue growth in the computer systems
segment, which went up 29 percent; Unix server revenue, which had a 23
percent increase; and IT services, which grew by 15 percent.

PC revenues were up 40 percent with home PC revenues up 62 percent,
notebooks up 164 percent, workstations up 11 percent, and commercial
desktops up 8 percent.

During the quarter, HP completed its previously announced 2-for-1 split of
its common stock in the form of a stock dividend.

However, the company is dissatisfied with diluted earnings per share
(EPS), which are up 14 percent from the year-ago quarter. EPS for the
quarter was 41 cents on a diluted basis, excluding investment and
divestiture gains and losses, the effects of stock appreciation rights and
balance sheet translation, and restructuring expenses.

Including these items, diluted EPS on a reported basis was 45 cents per
share on approximately 2.05 billion shares of common stock and equivalents
outstanding. This compares with diluted EPS of 36 cents in the same period
last year, according to Carly Fiorina, chairman, president and CEO.

“We are pleased that revenue growth is accelerating, but very
disappointed that we missed our EPS growth target this quarter due to the
confluence of a number of issues that we now understand and are urgently
addressing. I accept full responsibility for the shortfall,” she said.

She attributed losses to margin pressures, adverse currency effects,
higher-than-expected expenses and business mix.

Fiorina added that she was unhappy with a break-off in discussions with
PricewaterhouseCoopers (PwC) regarding the potential acquisition of its
consulting business.

“We are disappointed that we have not been able to reach a mutually
acceptable agreement to acquire PwC’s consulting business,” she said. “We
believe the strategic logic underlying this acquisition is compelling.
However, given the current market environment, we are no longer confident
that we can satisfy our value creation and employee retention objectives —
and I am unwilling to subject the HP organization to the continuing
distraction of pursuing this acquisition any further.

“We remain committed to aggressively growing our consulting capabilities,
organically and possibly by acquisition, and are open to other business
arrangements to achieve our goals.” she said.

For the 2001 fiscal year ending Oct. 31, 2001, HP expects to achieve revenue
growth in the range of 15 to 17 percent, compared to the 15 percent
anticipated for fiscal year 2000.

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