HP today. Business Summary PALO ALTO, Calif Nov. 13, 2000 Hewlett-Packard Company NYSE HWP today reported 17 revenue growth 20 excluding currency effects in its fourth fiscal quarter ended Oct. 31, 2000. Excluding extraordinary other income and restructuring expenses, diluted earnings per share EPS was up 14 from the year-ago quarter. During the quarter, HP completed its previously announced 2-for-1 split of its common stock in the form of a stock dividend.
Share and per-share amounts have been adjusted to reflect this split. Net revenue was 13.3 billion, compared with 11.4 billion in last year s fourth quarter. EPS for the quarter was 41 cents on a diluted basis, 1 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 2 . 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, said Carly Fiorina, HP chairman, president and chief executive officer.
Issues that reduced profitability included margin pressures, adverse currency effects, higher-than- expected expenses, and business mix. The good news is that our business is healthy, demand is strong, and we are making good progress against our strategic objectives as we continue the hard work of reinventing hp. We are determined to succeed and are not backing away from our growth targets, Fiorina said. HP also announced it has terminated discussions with PricewaterhouseCoopers PwC regarding the potential acquisition of its consulting business. Fiorina said, We are disappointed that we have not been able to reach a mutually acceptable agreement to acquire PwC s consulting business.
This is a high-quality operation, and 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. Business Summary Net revenue in the United States was 6.0 billion, an increase of 13 from the year-ago quarter. Revenue from outside the U.S. rose 20 26 in local currency to 7.3 billion. In Europe, revenue was 4.5 billion, an increase of 15 27 in local currency. In Asia Pacific, revenue was 1.9 billion, an increase of 36 34 in local currency. In Latin America, revenue increased 11 to 0.6 billion.
Imaging and Printing Systems The imaging and printing systems segment laser and inkjet printing, and imaging devices and associated supplies grew 6 in revenue year over year 9 in local currency against a very strong quarter last year. Internet printing and a migration to color are driving strategy and growth.
Strong sales of supplies, scanners, all-in-one AiO products, and consumer imaging devices, as well as overall strength in Europe and Asia, partially offset softness in the U.S. business printing market and continuing price erosion in inkjet printers. Nearly 12 million printing and scanning devices were shipped during the quarter. HP s color LaserJet market share continues to grow and new products began shipping in October. Imaging revenues grew 31 over the year-ago period, driven by strong performances in all product lines AiOs up 31 , scanners up 12 and digital cameras and printers up 137 . AiO units were up 53 and PhotoSmart printer units were up 208 . Supplies revenues grew 15 against a strong quarter last year. Operating margin was 13.4 , up from 13.2 last year. Computing Systems The computing systems segment a broad range of Internet infrastructure systems and solutions for businesses and consumers, including workstations, desktops, notebooks, mobile devices, UNIX R and PC servers, storage and software solutions grew 29 in revenue year over year 32 in local currency with strong performances across all product categories. UNIX server revenues rose 23 year over year, with orders up 43 , driven by excellent performance in low- and mid-range servers.
Superdome, HP s new high-end server introduced this quarter, is achieving stronger-than-expected market acceptance, and volume shipments remain on schedule for January.
NetServer revenues were up 20 . Enterprise storage revenues were up 40 with the HP Surestore E Disk Array XP512, HP s flagship enterprise storage product, up 90 in revenues with strong backlog.
Software revenues excluding VeriFone were up 18 , but down sequentially with strong order backlog at the end of the quarter. OpenView revenues were up 29 with orders up 60 . PC revenues were up 40 , with home PC revenues up 62 , notebooks up 164 , workstations up 11 , and commercial desktops up 8 . Operating margin was 3.7 , up from 3.2 last year, but down sequentially from 7.3 in the third quarter primarily due to margin pressures, higher expenses and mix changes. IT Services The IT services segment hardware and software services, along with mission-critical, outsourcing, consulting and customer financing services grew 15 in revenue year over year 18 in local currency. HP s consulting business achieved in 46 revenue growth, with substantial new hires broadening and deepening the organization s capabilities.
Operating margin was 7.4 , essentially flat with 7.5 last year. Costs and Expenses Cost of goods sold this quarter was 72.5 of net revenue, up from 71.3 in the year- ago period.
Expenses grew 15 . After adjusting for currency, expense growth was 17 . Operating expenses, as reported, were 20.3 of net revenue. This compares with 20.7 in the comparable period last year. Asset Management Return on assets for the quarter was 10.5 compared with 9.8 in the comparable quarter last year. Inventory was 11.7 of revenue compared with 11.5 in last year s fourth fiscal quarter. Trade receivables were 13.1 of revenue compared with 14.1 in the prior year period.
Net property, plant and equipment was 9.2 of revenue compared with 10.2 in the year-ago quarter. Full-year Review Net revenue increased 15 to 48.8 billion. Net revenue in the United States rose 14 to 21.6 billion, while revenue from outside the United States increased 16 to 27.2 billion. Net earnings from continuing operations were 3.6 billion, an increase of 15 , compared with 3.1 billion in fiscal 1999. Net earnings per share were 1.73 on a diluted basis, up 16 from 1.49 last year. Outlook for FY 2001 For the 2001 fiscal year ending Oct. 31, 2001, HP expects to achieve revenue growth in the range of 15 to 17 , compared to 15 in FY 2000. Gross margin percentage in FY 2001 is expected to be in the range of 27.5 to 28.5 , compared to 28.5 in FY 2000, with improvements beginning in the 2nd quarter.
Total operating expenses in FY 2001 are expected to be approximately 10 to 12 above FY 2000. Tax rate is expected to remain constant at approximately 23 . The forward-looking statements in this Outlook are based on current expectations and are subject to risks, uncertainties and assumptions described under the sub-heading Forward-Looking Statements.
Actual results may differ materially from the expectations expressed above. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after Oct. 31, 2000. HP will be discussing its fourth quarter results and its 2001 outlook on a conference call today, beginning at 6 a.m. PST . A live Webcast of the conference call will be available at http www.hp.com hpinfo investor quarters 2000 q4webcast.html. A replay of the Webcast will be available at the same Web site shortly after the call and will remain available through 4 30 p.m. PST on Nov. 22, 2000.