PALO ALTO, Calif.--Feb. 15, 2006-- HP today reported financial results for its first fiscal quarter ended Jan. 31, 2006, with net revenue of $22.7 billion, an increase of 6% year-over-year, or 8% in constant currency. Non-GAAP operating profit(1) was $1.7 billion, with non-GAAP diluted earnings per share (EPS)(1) of $0.48 (includes stock based compensation expense), up from $0.37 in the prior-year period. Non-GAAP financial information for the first quarter excludes $166 million of adjustments on an after-tax basis, or $0.06 per diluted share, related primarily to amortization of purchased intangibles, and in-process research and development-related costs. GAAP operating profit was $1.5 billion and GAAP diluted EPS was $0.42 per share, up from $0.32 in the prior-year period. "We are continuing to deliver on our plan to strengthen HP and better serve our customers," said Mark Hurd, HP chief executive officer and president. "Growth was balanced across most of our businesses and geographies, cash flow was strong and we were disciplined in controlling costs. While hard work remains ahead of us, our efforts are starting to show results." During the quarter, on a year-over-year basis, revenue in the Americas grew 10% to $9.7 billion, Europe, the Middle East and Africa grew 1% to $9.4 billion, and Asia Pacific grew 6% to $3.5 billion. Personal Systems Group Personal Systems Group (PSG) revenue grew 8% year-over-year to $7.4 billion, with unit shipments up 16%. On a year-over-year basis, desktop revenue increased 1% and notebook revenue grew 26%. Commercial PC revenue grew 6% year-over-year, while Consumer PC revenue increased 18%. PSG reported an operating profit of $293 million, or 3.9% of revenue, up from a profit of $147 million, or 2.1% of revenue, in the prior-year period. Imaging and Printing Group Imaging and Printing Group (IPG) posted quarterly revenue of $6.5 billion, up 8% year-over-year. On a year-over-year basis, consumer hardware revenue increased 1%, led by All-in-One unit growth of 20%. Commercial hardware revenue grew 6%, with unit shipments of color laser printers up 36% and printer-based MFP shipments up 40%. Supplies revenue grew 11%. Operating profit was $973 million, or 14.9% of revenue, up from a profit of $932 million, or 15.4% of revenue, in the prior-year period. Enterprise Storage and Servers Enterprise Storage and Servers (ESS) reported revenue of $4.2 billion, up 5% over the prior-year period. On a year-over-year basis, industry-standard server revenue increased 6%, networked storage revenue grew 4% and business-critical systems revenue grew 1%. ESS reported an operating profit of $326 million, or 7.7% of revenue, up from a profit of $69 million, or 1.7% of revenue, in the prior-year period. HP Services HP Services (HPS) revenue declined 2% year-over-year to $3.8 billion. On a year-over-year basis, Technology Services revenue declined 2%, while Managed Services and Consulting and Integration declined 1% each. Excluding the effects of currency, HPS revenue grew 3% year-over-year. Operating profit was $293 million, or 7.8% of revenue, up from a profit of $281 million, or 7.4% of revenue, in the prior-year period. Software Software reported quarterly revenue of $304 million, an increase of 29% year-over-year, with revenue in HP OpenView and HP OpenCall increasing 34% and 19%, respectively. During the quarter, HP closed the acquisition of Peregrine Systems, Inc., which adds key asset and service management components to the HP OpenView portfolio. Software reported an operating profit of $9 million, or 3.0% of revenue, compared with a loss of $38 million in the prior-year period. Financial Services HP Financial Services (HPFS) reported revenue of $496 million, a decrease of 11% year-over-year. Finance volume and net portfolio assets declined 10% and 2% respectively. Operating profit was $38 million, or 7.7% of revenue, down from a profit of $45 million, or 8.1% of revenue, in the prior-year period. Asset management Inventory ended the quarter at $6.7 billion, down $146 million sequentially and down $389 million year-over-year. Accounts receivable decreased $1.2 billion sequentially and increased $14 million over the prior-year period to $8.7 billion. HP's dividend payment of $0.08 per share in the first quarter resulted in cash usage of $227 million. HP utilized $1.4 billion of cash during the first quarter to repurchase stock. During the quarter, HP entered into a $1.7 billion prepaid forward variable share repurchase program with a third-party investment bank to limit HP's exposure to share price volatility for repurchases made under the program during an approximate one-year period. In addition, the board of directors of HP has authorized an additional $4 billion for future repurchases of its outstanding shares of common stock. The company intends to offset dilution from the issuance of shares under employee benefit plans, as well as to use the authorization to repurchase shares opportunistically. HP exited the quarter with $12.0 billion in gross cash,(2) which includes cash and cash equivalents of $11.9 billion and short- and certain long-term investments of $30 million. Outlook HP estimates Q2 FY06 revenue will be in the range of $22.4 billion to $22.6 billion, with non-GAAP diluted earnings per share expected to be in the range of $0.47 to $0.49. On a GAAP basis, Q2 FY06 diluted earnings per share is expected to be in the range of $0.43 to $0.45. Non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.04 per share, related primarily to the amortization of purchased intangible assets. Second quarter non-GAAP and GAAP diluted earnings per share include $0.03-$0.04 of stock-based compensation expense. HP estimates full year FY06 revenue will be in the range of $90.0 billion to $91.0 billion, with full year non-GAAP diluted earnings per share expected to be in the range of $1.90 to $1.95. On a GAAP basis, full year FY06 GAAP diluted earnings per share is expected to be in the range of $1.72 to $1.77. Full year FY06 non-GAAP diluted earnings per share estimates exclude after-tax costs of approximately $0.18 per share, related primarily to the amortization of purchased intangible assets. Full year FY06 non-GAAP and GAAP diluted earnings per share includes $0.13 of stock-based compensation expense. More information on HP's quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations website at www.hp.com/hpinfo/investor/. HP's Q1 FY06 earnings conference call is accessible via an audio webcast at www.hp.com/hpinfo/investor/financials/quarters/2006/q1webcast.html.