Hewlett-Packard (NASDAQ:HPQ) reported better than expected results, shares are up over 5% in after hours trading. Hewlett-Packard (NASDAQ:HPQ)’s revenue upside was likely driven by services revenues as most of the other segments were relatively in-line with consensus. The earnings upside was driven by a combination of operational results ($0.07 out of $0.11) and below the line items. Fundamentally, some investors believe Hewlett-Packard (NASDAQ:HPQ)’s results indicate that it continues to lose share in most of its end markets while the decline might be better than expected.


Revenue and EPS beat expectations. Hewlett-Packard reported revenues and EPS of $28.4B and $0.82 vs. consensus of $27.9B and $0.71, respectively. The company’s operating margin came in at 8% vs. consensus of 7%. The upside to revenues and margins contributed to about $0.07 of EPS upside while the remainder of the upside was driven by below the line items. HP also improved its net cash position by about $1B or ~$0.50 per share.

All segments continued to show declining sales. While the results were clearly better than expected, underlying fundamentals remain challenging for the company. It posted declining Y/Y sales in every category except for
desktops and networking, which went up by mid-single digits. The company continues to lose share in the enterprise server market. The revenue upside seems to have been be delivered by the services segment, which likely did not experience as much decline as expected.

F2Q13 and FY13 estimates to move higher. Hewlett-Packard guided F2Q13 EPS to $0.80-0.82 versus consensus of $0.77. For the full year, management reiterated its EPS outlook of $3.40-3.60, which compares with consensus of $3.30.

Conference Call

On the call Hewlett-Packard CEO Meg Whitman stated:

You will recall that I referred to fiscal 2013 as a fix and rebuild year that would set Hewlett-Packard up for a recovery and expansion in 2014. Since announcing our turnaround plan we’ve done what we said we would do. We’ve defined a clear strategy for the business, we’ve made significant progress in bringing our costs in line with revenues, and most importantly we’ve exceeded the financial performance we said we would deliver.

With the first quarter of 2013 behind us, we’re starting to see some traction in our performance as a result of the actions we took in 2012 to lay the foundation for Hewlett-Packard’s future.

While the results in the first quarter were not where we want them to be, we did better than we expected. But let me repeat what I’ve said so many times before.

HP’s turnaround will it not be linear, and our primary focus is to deliver on our outlook for the full year. That means continuing to I am me men critical programs to strengthen our balance sheet, optimize our supply chain, speed innovation, and demonstrate our product leadership across our markets.

In the first quarter, HP delivered $0.1 2 in diluted nobody GAAP earnings per share, exceeding our financial outlook of $0.68 to $0.71 per share.

This is tangible proof that we have the right plan in place and that we’re successfully delivering on it. Performance in the quarter was driven by improved execution as well as improvement in our channel and go to market efforts.

Innovation is the heart of this company and we expect this reif cussed lab to bring revolutionary new product to market that will change the way we manage, interact, and move, an be I later.

Tch the first commercialized product from our project moon shot.

We expect this to truly revolutionize the economics of — new category of server that consumes up to 89% less energy and 93% less cost than a traditional X86 server environment.

To put in that perspective, if just 10 large web services providers switched their traditional x86 servers to moon shot they could save a combined $120 million in energy operating expense and nearly a metric tons of CO2 per year. The equivalent of taking over 180,000 cars off the road for a year.

That is a game changer.