Hewlett-Packard profits confound predictions by 20%

Technology heavyweight Hewlett-Packard stunned Wall Street yesterday by announcing profits that missed forecasts by nearly 20 per cent, two days before results had been expected, and saying it had ended talks to buy the PricewaterhouseCoopers consulting business.

The computer and printer maker's stock fell more than 15 per cent.

Hewlett-Packard, based in Palo Alto and which employs 1,500 people in the Republic, reported fourth-quarter earnings far short of Wall Street expectations, citing margin pressures, adverse currency effects, higher-than-expected expenses, and business mix.

Hewlett-Packard's chairman, president and chief executive officer, Ms Carly Fiorina, said the firm decided over the weekend to disclose its earnings early, after seeing the financial results and deciding to end merger talks.

She said she was "very disappointed that we missed our [earnings per share] growth target this quarter due to the confluence of a number of issues that we now understand and are urgently addressing. I accept full responsibility for the shortfall".

Hewlett-Packard also said it had terminated talks to buy the consulting business of PricewaterhouseCoopers.

Those talks, which came to light in September, were still in progress earlier this month, with Ms Fiorina saying she was looking for a better deal than the $18 billion previously under discussion.

"I am unwilling to subject the HP organisation to this distraction of pursuing this acquisition any further," Ms Fiorina said. "In hindsight I let the PWC opportunity linger for too long." But she left the possibility open for some future deal to expand Hewlett-Packard's services business.

Hewlett-Packard reported fiscal fourth-quarter earnings per share of 41 cents, excluding investment and divestiture gains and losses, the effects of stock appreciation rights and balance sheet translation, and restructuring expenses.

Analysts had been expecting 51 US cents per share, according to research firm First Call/Thomson Financial.

Including these items, the computermaker earned 45 US cents per share on about 2.05 billion shares of common stock and equivalents outstanding.

This compares with 36 US cents in the same period 1999, adjusted for expenses related to the spin-off of Agilent Technologies and the incremental effect of a stock appreciations rights plan.

For the fourth quarter, net revenue reached $13.3 billion (€15.5 billion), compared with $11.4 billion in last year's fourth quarter.

Net revenue in the US grew 13 per cent to $6 billion and outside US revenue rose 20 per cent to $7.3 billion.

European revenue was $4.5 billion, up 15 per cent; Asia Pacific, revenue reached $1.9 billion, up 36 per cent; and revenue in Latin America rose to $0.6 billion, up 11 per cent.