PALO ALTO, Calif.-- HP today reported financial results for its fourth fiscal quarter ended Oct. 31, 2003. Fourth quarter revenue was $19.9 billion, an increase of 10% year-over-year and 14% over the third fiscal quarter. This compares to analyst consensus estimates of $19.0 billion for the quarter. Non-GAAP(1) operating profit was $1.4 billion for the quarter, or 7.2% of revenue, an increase of 63% year-over-year and 67% sequentially. Non-GAAP diluted earnings per share (EPS) was $0.36 for the quarter, compared to analyst consensus estimates of $0.35, up 50% from $0.24 last year and 57% from $0.23 in the third quarter. Non-GAAP diluted EPS and non-GAAP net earnings include a $241 million adjustment on an after-tax basis, or $0.08 per diluted share. The pre-tax adjustment includes $190 million of restructuring charges, $143 million in amortization of purchased intangible assets, and $29 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 $1.1 billion or 5.4% of revenue, an improvement of $648 million or 152% year-over-year and $772 million or 256% sequentially. GAAP diluted EPS was $0.28 per share, up 115% from $0.13 year-over-year and 180% from $0.10 in the third quarter. "This was a great quarter. By any measure, we hit our stride and demonstrated what the merger was all about. I'm proud of the entire HP team," said Carly Fiorina, HP chairman and chief executive officer. "HP's excellent fourth quarter performance capped a fiscal year in which we delivered on our commitments. We achieved profitability in each of our businesses. We grew revenue and market share. We exceeded our integration and cost saving goals ahead of schedule, and we generated cash flow from operations in excess of $6 billion for the year," she said. "We did all of this while strengthening our direct sales, service and support capabilities and investing more than $1 billion in software, $600 million in the HP brand, $400 million in our IT systems, and $275 million in training and developing our people. "As we committed, we returned the Enterprise Systems business to profitability in the fourth quarter by delivering a $106 million operating profit. This represents a $610 million turnaround in profitability in this business on a full-year combined company basis. Strong revenues were accompanied by year-over-year gross margin improvement, record revenues in software, record shipments of industry-standard servers and high-end Superdome systems, and a strong performance in the fastest growing segment of the storage market. "HP Services posted strong quarterly revenue and operating profit driven by robust growth in managed services and improved customer support margins. Managed services grew 36% year-over-year, four times faster than the market. Customers have been looking for an alternative to IBM, and they've found it in HP. "Revenue in Personal Systems was $6 billion, up 19% year over year and 21% sequentially, fueled by 53% unit growth in notebooks and 23% unit growth in desktops. We saw strong revenue growth in all regions and operating profit improved by almost $400 million on a full-year combined company basis. We also gained significant share across the PC market and again outgrew our nearest competitor in notebooks, further solidifying our lead in this strategic category. "Imaging and Printing delivered another record revenue and profit performance for the quarter and the full year. Quarterly operating profit surpassed $1 billion for the first time, as we continued to gain share. We set new records for shipments of digital cameras, inkjet printers, laser printers, and supplies. In fiscal 2003, we shipped a record 43 million printers, with almost 13 million in the fourth quarter alone," said Fiorina. HP closed fiscal 2003 with $14.7 billion in gross cash after funding more than $2.6 billion in restructuring charges, retirement funding, and retention payments, as well as $750 million in stock repurchases and a dividend payout of $977 million -- the highest yield in the industry. "We've made the tough decisions, the portfolio choices and the necessary investments. We enter the new fiscal year with strong momentum. I have never been more confident in HP's competitive position," said Fiorina. During the quarter, revenue in the Americas grew 6% year-over-year and 14% over the third quarter to $9.2 billion, and represented 46% of total revenue. Europe grew 14% year-over-year and 16% over the third quarter to $7.6 billion, and represented 39% of total revenue. Asia-Pacific grew 16% year-over-year and 10% over the third quarter to $2.2 billion, and represented 11% of total revenue. Japan grew 5% year-over-year and 12% over the third quarter to $835 million, and represented 4% of total revenue. Enterprise Systems Enterprise Systems revenue was $4.1 billion, up 2% year-over-year and 10% sequentially. Operating profit for the quarter totaled $106 million, a $235 million profit improvement over the year ago quarter, and a $176 million improvement over the third quarter. On a full-year combined company basis, operating profit improved by $610 million, reflecting supply chain and manufacturing cost improvements, operating expense discipline, targeted R&D spend and headcount reductions. Every region was profitable with strong sequential improvement. Gross margin, up 1.3 percentage points year-over-year, was essentially flat sequentially despite a tough pricing environment. According to the most recent Gartner Dataquest market share reports, HP re-gained the No. 1 position in total server shipments in the United States during the third calendar quarter with 26.6% of total shipments. During this period, HP's U.S. server shipments grew faster than the market, with 10% sequential growth and 28% growth year-over-year. Industry-standard server revenue increased 9% year-over-year to record revenues driven by unit growth of 21%. During the most recent calendar quarter, HP extended its lead in the x86 market, regained the U.S. market share lead, and closed the quarter with 32% worldwide share. HP's share of the industry standard server market is above 50% in 15 countries, more than the two nearest competitors combined in Europe. HP also leads the x86 Linux market with 26% worldwide share. HP Superdome shipments set another record for the quarter, with units shipped increasing 17% year-over-year. Midrange and low-end UNIX stabilized and were both essentially flat year-over-year. High-end UNIX declined 10%. Both NonStop and Alpha declined in the mid-single digits. In the sweet spot of the storage market, HP's enterprise array offerings grew 109% in the flagship midrange and 14% in the high-end year-over-year. The tape business declined 14% as HP exited the OEM library business. Software revenue grew 20% year-over-year to a new record, with OpenView up 17% and OpenCall up 36%. Services HP Services revenue was $3.2 billion, up 5% both year-over-year and sequentially. Strong managed services momentum continued with year-over-year growth of 36%. For the full year, combined company revenue for managed services was up 22%. Customer support revenue increased 5% year-over-year. Revenue in consulting and integration declined 10% year-over-year, reflecting continued weakness in the consulting market. Operating profit was $393 million, or 12.2% of revenue. Operating profit increased 9% over the prior year period, and 17% sequentially, reflecting tight expense management. Personal Systems Personal Systems revenue totaled $6.0 billion in the quarter, up 19% year-over-year and 21% sequentially. Units increased 35% year-over-year, fueled by notebook growth of 53% and desktop growth of 23%. HP widened its lead in the notebook market with year-over-year unit growth of 60% in the third calendar quarter, growing at almost twice market rates and 18 percentage points faster than the nearest competitor. Over the past four calendar quarters, HP increased its share of the total worldwide PC market by almost 2 percentage points. In the same period, HP's award-wining iPAQ series of handhelds grew 100% year-over-year, and gained 6.9 percentage points of share sequentially. Personal Systems reported an operating profit of $21 million in the quarter, compared to an operating loss of $68 million in the prior year period and an operating loss of $56 million in the third quarter. The Personal Systems business was profitable for the year, with operating profit increasing $391 million on a full-year combined company basis, reflecting supply chain savings and expense discipline. Imaging and Printing Imaging and Printing posted record revenues of $6.2 billion in the quarter, an increase of 11% year-over-year and 19% sequentially, led by year-over-year supplies growth of 14%, business hardware growth of 6% and home hardware growth of 5%. Digital imaging revenue grew 18% over the prior year period. HP strengthened its leadership position in key categories around the world. HP gained an additional 8 percentage points of share in the U.S. inkjet market in the third calendar quarter, closing the quarter with 56% share. Recent data from NPD Group shows HP lengthened its lead in the all-in-one market with 66% share. Operating profit surpassed $1.0 billion for the first time, up 7% year-over-year and 36% sequentially, and represented 16% of revenue. Gross margin was down slightly sequentially, reflecting a strong hardware mix relative to supplies. Financial Services Revenue was $461 million, down 14% year-over-year and up 4% sequentially. Operating profit was $26 million for the quarter versus an operating loss of $101 million in the prior year period and up from a profit of $18 million in the third quarter. The business was profitable each of the last four quarters. Asset management HP exited the quarter with $14.7 billion in gross cash, which includes cash and cash equivalents of $14.2 billion and short- and certain long-term investments of approximately $500 million. Cash generated from operations for the quarter was approximately $2.4 billion after $269 million in cash payments related to restructuring and $321 million in retirement funding during the quarter. Inventory ended the quarter at $6.1 billion, up $268 million year-over-year and down $77 million sequentially. Trade receivables increased $1.3 billion from the prior quarter to $8.9 billion, reflecting top line growth. HP's dividend payment of $0.08 per share in the fourth quarter resulted in a cash use of $244 million. In addition, HP repurchased $202 million of stock. Outlook HP estimates revenues will range from $19.1 billion to $19.5 billion in its first fiscal quarter of 2004, as compared to current consensus of $19 billion, reflecting 2% to 4% seasonal revenue decline. The company expects EPS of $0.35 on a non-GAAP basis in line with current consensus estimates. This represents EPS growth of 21% year-over-year. HP also affirmed current consensus EPS estimates of $1.42 on a non-GAAP basis for the full fiscal year -- a 22% increase in earnings per share. The non-GAAP EPS expectations assume after-tax exclusion for quarterly charges of approximately $0.04 per share from amortization of purchased intangible assets and acquisition-related charges.