PALO ALTO, Calif.--Feb. 20, 2007-- HP today announced financial results for its first fiscal quarter ended Jan. 31, 2007, with net revenue of $25.1 billion, representing growth of 11% year-over-year, or 7% when adjusted for the effects of currency. GAAP operating profit was $1.8 billion and GAAP diluted earnings per share (EPS) was $0.55 per share, up from $0.42 in the prior year period. Non-GAAP operating profit was $2.2 billion, with non-GAAP diluted EPS of $0.65, up from $0.48 in the prior year period. Non-GAAP financial information excludes $279 million of adjustments on an after-tax basis, or $0.10 per diluted share, related primarily to the amortization of purchased intangibles and in process research and development charges related to acquisitions. GAAP and non-GAAP financial information include all stock-based compensation expense in both current and prior year periods. "HP delivered a strong first quarter, with improved margins and solid revenue growth across our businesses," said Mark Hurd, HP chairman and chief executive officer. "We have a lot of work and opportunities ahead of us. I am confident we can continue to execute with discipline and deliver a year of strong financial returns." Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below. During the quarter, on a year-over-year basis, revenue in the Americas grew 6% to $10.4 billion, revenue in Europe, the Middle East and Africa grew 14% to $10.7 billion, and revenue in Asia Pacific grew 15% to $4.0 billion. When adjusted for the effects of currency, revenue in the Americas grew 6%, revenue in Europe, the Middle East and Africa grew 7%, and revenue in Asia Pacific grew 12%. Personal Systems Group Personal Systems Group (PSG) revenue grew 17% year-over-year to $8.7 billion, with unit shipments up 19% on a year-over-year basis. Notebook revenue grew 40% over the prior year period, while desktop revenue declined 1%. Commercial client revenue grew 8% year-over-year, while Consumer client revenue increased 28%. Operating profit was $414 million, or 4.7% of revenue, up from a profit of $293 million, or 3.9% of revenue, in the prior year period. Imaging and Printing Group Imaging and Printing Group (IPG) revenue grew 7% year-over-year to $7.0 billion. On a year-over-year basis, supplies revenue grew 11%, commercial hardware revenue grew 2% and consumer hardware revenue was flat. Printer unit shipments increased 18% year-over-year, with consumer printer hardware units up 16% and commercial printer hardware units up 21%. Momentum in key growth initiatives continued, with all-in-one unit shipments up 27% year-over-year, appliance photo printers up 49%, color laser printers up 35% and printer-based MFPs up 80%. HP Indigo Press printed page volume grew 40% over the prior year period. Operating profit was $1.1 billion, or 15.3% of revenue, up from a profit of $973 million, or 14.9% of revenue, in the prior year period. Enterprise Storage and Servers Enterprise Storage and Servers (ESS) reported revenue of $4.5 billion, up 5% over the prior year period. On a year-over-year basis, industry-standard server revenue increased 10%, with blade revenue up 45%. Storage revenue grew 3%, with revenue growth of 18% in the midrange EVA line offset by declines in the high-end array and tape businesses. Business critical systems revenue declined 6%, with Integrity systems growth of 75% offset by declines in PA-RISC and Alpha. Operating profit was $416 million, or 9.3% of revenue, up from a profit of $326 million, or 7.7% of revenue, in the prior year period. HP Services HP Services (HPS) revenue increased 5% year-over-year to $3.9 billion. Revenue in Technology Services grew 1% over the prior year period, while Consulting and Integration revenue up 10% and Outsourcing Services revenue up 11%. Operating profit was $414 million, or 10.5% of revenue, up from a profit of $293 million, or 7.8% of revenue, in the prior year period. HP Software HP Software revenue was $550 million, an increase of 81% year-over-year, reflecting strong momentum in the Mercury business, HP OpenView growth of 14% and revenue declines of 6% in HP OpenCall. Excluding the effects of the Mercury acquisition, which closed on Nov. 6, 2006, revenue increased 7% over the prior year period. As part of integration efforts, Mercury and OpenView offerings will be combined under a new leadership category of Business Technology Optimization (BTO) software solutions. Operating profit was $47 million, or 8.5% of revenue, up from a profit of $9 million, or 3.0% of revenue, in the prior year period. Financial Services HP Financial Services (HPFS) reported revenue of $547 million, an increase of 10% year-over-year. Financing volume and net portfolio assets increased 4% over the prior year period. Operating profit was $32 million, or 5.9% of revenue, down from a profit of $38 million, or 7.7% of revenue, in the prior year period. Asset management Inventory ended the quarter at $8.4 billion, up $630 million sequentially and $1.6 billion year-over-year. Accounts receivable decreased $470 million sequentially and increased $1.7 billion over the prior year period to $10.4 billion. Accounts payable decreased $742 million sequentially and grew $2.4 billion over the prior year period to $11.4 billion. HP's dividend payment of $0.08 per share in the first quarter resulted in cash usage of $218 million. HP utilized $2.3 billion of cash during the first quarter to repurchase approximately 57 million shares of common stock. In addition, HP received 13 million shares of common stock under the company's prepaid variable share purchase program. HP exited the quarter with $10.4 billion in gross cash, which includes cash and cash equivalents of $10.1 billion, short-term investments of $306 million, and certain long-term investments of $21 million. Retirement plan modifications, early retirement offer HP also announced that it will modify its defined-benefit pension plan for those employees currently accruing benefits under the program, effective Jan. 1, 2008. As a result of this action, the company estimates that it will receive a one-time pension curtailment gain of approximately $500 million. As part of the announcement, the company announced that it is offering an option for eligible employees to participate in an early retirement program. Employees not wishing to take advantage of the early retirement program will benefit from an increased company 401(k) match from 4% to 6%. The company expects the curtailment gain to offset the cost of the early retirement program. These changes do not affect pension benefits currently received by retirees and existing employees retain the benefits they have already earned. Outlook HP estimates Q2 FY07 revenue will be approximately $24.5 billion. Second quarter FY07 GAAP diluted EPS is expected to be in the range of $0.57 to $0.58, and non-GAAP diluted EPS is expected to be in the range of $0.63 to $0.64. Non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.06 per share, related primarily to the amortization of purchased intangible assets. HP estimates full year FY07 revenue will be approximately $98.0 billion to $99.0 billion. FY07 GAAP diluted EPS expected to be in the range of $2.35 to $2.40, and FY07 non-GAAP diluted EPS is expected to be in the range of $2.60 to $2.65. FY07 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.25 per share, related primarily to the amortization of purchased intangible assets and in process research and development charges. Second quarter and FY07 GAAP diluted EPS estimates do not reflect the impact of the retirement plan modifications and the voluntary early retirement program because the level of participation in the retirement program is uncertain.