PALO ALTO, Calif. -- HP today announced financial results for its first fiscal quarter ended Jan. 31, 2009, with net revenue of $28.8 billion, up 1% from a year earlier and up 4% when adjusted for the effects of currency.

In the first quarter, GAAP operating profit was $2.5 billion and GAAP diluted earnings per share (EPS) was $0.75, down from $0.80 in the prior-year period. Non-GAAP operating profit was $3.1 billion, with non-GAAP diluted EPS of $0.93, up from $0.86 in the prior-year period. Non-GAAP financial information excludes $431 million of adjustments on an after-tax basis, or $0.18 per diluted share, related primarily to amortization of purchased intangible assets, restructuring charges and acquisition-related charges. GAAP and Non-GAAP diluted EPS include $0.03 of charges related to currency hedging losses.

"HP is a market leader executing well in a tough market," said Mark Hurd, HP chairman and chief executive officer. "Our market strength, disciplined cost management and diverse portfolio allowed us to differentiate HP in the global marketplace and gain share in key markets."

Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below. Unless otherwise noted, all growth rates included in the narrative below reflect year-over-year comparisons.

Revenue grew 11% in the Americas to $12.4 billion. Revenue declined 3% in Europe, the Middle East and Africa and 11% in Asia Pacific to $12.0 billion and $4.4 billion, respectively. When adjusted for the effects of currency, revenue grew 13% in the Americas and 1% in Europe, the Middle East and Africa while declining 9% in Asia Pacific. Revenue from outside of the United States in the first quarter accounted for 65% of total revenue, with revenue in the BRIC countries (Brazil, Russia, India and China) declining 22% over the prior-year period while accounting for 7% of total HP revenue.

Personal Systems Group

Personal Systems Group (PSG) revenue declined 19% to $8.8 billion, with unit shipments down 4%. Notebook revenue for the quarter was down 13%, while Desktop revenue declined 25%. Commercial client revenue was down 19%, while Consumer client revenue decreased 18%. Operating profit was $435 million, or 5.0% of revenue, down from $628 million, or 5.8% of revenue, in the prior-year period.

Imaging and Printing Group

Imaging and Printing Group (IPG) revenue declined 19% to $6.0 billion. Supplies revenue was down 7%, while Commercial hardware revenue and Consumer hardware revenue declined 34% and 37%, respectively. Printer unit shipments decreased 33%, with Consumer printer hardware units down 31% and Commercial printer hardware units down 39%. Operating profit was $1.1 billion, or 18.5% of revenue, versus $1.1 billion, or 15.5% of revenue, in the prior-year period.

Enterprise Storage and Servers

Enterprise Storage and Servers (ESS) reported total revenue of $3.9 billion, down 18%. Storage revenue declined 7% with the midrange EVA product line down 7%. Industry Standard Server revenue and Business Critical Systems revenue declined 22% and 17%, respectively, while ESS blade revenue grew 4%. Operating profit was $405 million, or 10.3% of revenue, down from $673 million, or 14.0% of revenue, in the prior-year period.

Services

Services revenue increased 116% to $8.7 billion due primarily to the EDS acquisition. Revenue in Technology Services was flat. ITO, Application Services and BPO posted revenue of $3.9 billion, $1.6 billion and $743 million, respectively. Operating profit was $1.1 billion, or 12.8% of revenue, up from $499 million, or 12.3% of revenue, in the prior-year period.

HP Software

HP Software revenue declined 7% to $878 million. Business Technology Optimization portfolio revenue declined 4% while Other Software revenue was down 14%. Operating profit was $140 million, or 15.9% of revenue, up from $49 million, or 5.2% of revenue, in the prior-year period.

HP Financial Services

HP Financial Services (HPFS) reported revenue of $636 million, down 1% from the prior-year period. Financing volume increased 2%, and net portfolio assets declined 3%. Operating margin was 6.4% of revenue, down from 6.7% in the prior-year period.

Asset management

HP generated $1.1 billion in cash flow from operations for the first quarter. Inventory ended the quarter at $7.6 billion, down 2 days. Accounts receivable of $14.8 billion was up 7 days. Accounts payable ended the quarter at $11.2 billion, down 1 day. HP's dividend payment of $0.08 per share in the first quarter resulted in cash usage of $193 million. HP utilized $1.2 billion of cash during the first quarter to repurchase approximately 34 million shares of common stock in the open market. HP exited the quarter with $11.3 billion in gross cash.

Outlook

HP estimates second quarter FY09 revenue will decline approximately two to three percent from the prior-year period.

Second quarter FY09 GAAP diluted EPS is expected to be approximately $0.70 to $0.72, and non-GAAP diluted EPS is expected to be approximately $0.84 to $0.86. Second quarter FY09 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.14 per share, related primarily to the amortization of purchased intangibles and restructuring charges.

HP estimates full year FY09 revenue will decline approximately two to five percent from the prior-year period.

Full year FY09 GAAP diluted EPS is expected to be approximately $3.19 to $3.31, and non-GAAP diluted EPS is expected to be approximately $3.76 to $3.88. FY09 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.57 per share, related primarily to the amortization of purchased intangibles and restructuring charges.

HP's outlook for the second quarter of FY09 and the full year FY09 assumes that first quarter FY09 market conditions will persist. In addition, HP has assumed that currency exchange rates will have an unfavorable year-over-year impact on revenue of approximately 7 or 8 percentage points for the second quarter of FY09 and the full year FY09.

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/investor/home.

HP's Q1 FY09 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q12009webcast.