Q2 2014 Earnings Call Transcript

Transcript Call Date 05/22/2014

In Technology Services revenue declined 5% over the prior year. The nature of this business means performance typically lags hardware sales overall. So we expect revenue to stabilize in line with the progress we've made in our hardware sales.

The leadership team in TS has done an excellent job managing this business and we continue to see very good customer adoption of our new services and margins remained strong.

In Software, revenue was flat over the prior year. Performance in the quarter was driven by growth in Autonomy licensing and strong double-digit growth in Security and Vertica, offset by softness in our traditional IT management business. Looking forward, we will continue our transition to SaaS, while rejuvenating our core portfolio and investing in operational improvements across this business.

In addition, I've asked George Kadifa to take on a new role as Executive Vice President, Strategic Relationship. In this role, George will be responsible for leading growth initiatives and alliance programs with key partners, service providers and our largest customers. After Leading HP Software, George has gained a unique perspective on our strategic priorities of cloud, big data, security and mobility. He understands both the customer requirements and the partner ecosystems that must be built to realize the potential of these technologies.

Robert Youngjohns will take over for George as the Executive Vice President and General Manager of HP Software. Robert is a very seasoned technology executive with more than three decades of experience. He joined the Company last year to lead the turnaround of HP Autonomy after serving as President of Microsoft, North America.

Overall, I am very pleased with the progress we've made, but we still have a lot more work to do. Our focus continues to be driving innovation, simplifying our organizational structure to speed decision-making and reducing cost. These initiatives are particularly important as we continue to navigate a rapidly shifting marketplace.

Against that backdrop, our Q3 outlook for non-GAAP diluted net earnings per share will be $0.86 to $0.90, and for the full year, the outlook will be $3.63 to $3.75.

So now let me turn it over to Cathie for a closer look at our performance in the quarter. Cathie?

Cathie Lesjak - EVP and CFO: Thanks Meg. As Meg said, we feel good about where we are overall as we reached the midpoint of the turnaround. In Q2, total Company revenue was in line with expectations, with pockets of strength in PCs and networking. Enterprise Group revenue was somewhat lower than expected as storage revenue fell, although Converged Storage solutions continued to outperform the market.

Total revenue for the quarter was $27.3 billion down 1% year-over-year and approximately flat in constant currency. By region, Americas revenue was $11.7 billion down 6% year-over-year or down 4% in constant currency. In the U.S. revenue was impacted by key account runoff in Enterprise Services, plus softness in LaserJet Printing and in most EG business units. This was partially offset by strength in commercial PCs and networking.

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