Hewlett-Packard cut its full-year outlook after quarterly revenue missed expectations on weak sales of printers, personal computers and servers, sending its shares down 6 per cent.
The world's largest PC maker said yesterday it expects the last quarter's weak market conditions to persist, and exchange rates to continue to hurt revenue, forcing it to slash its fiscal 2009 sales outlook by around $14 billion.
"We just don't want to bank on the fact that the economy is going to get better," Chief Executive Mark Hurd said on a conference call, as he emphasized HP's plans to create a leaner cost structure. "I mean, we just don't see a catalyst to change it."
While HP's diversified business lines - which also include computer services and software - have kept it relatively resilient to the economic downturn, it is still vulnerable to sharp cutbacks in corporate spending on technology.
"The big disappointment, not surprisingly, is the shortfall in revenue," said Pacific Crest Securities analyst Brent Bracelin. "Their hardware businesses, both servers and storage, are under intense scrutiny. Budgets are being cut and that showed up in the shortfall today."
For fiscal 2009, HP on Wednesday forecast profit excluding items of $3.76 to $3.88 a share, on a revenue of roughly $112.5 billion to $116 billion. That compared with its previous forecast for earnings per share of $3.88 to $4.03 on revenue of $127.5 billion to $130 billion.
Wall Street analysts, on average, had expected earnings of $3.78 a share on revenue of $126.6 billion.
"They are vulnerable to weakening PC sales," said Shebly Seyrafi, analyst at Calyon Securities. "Shares are down on a combination of the actual results, the revenue mess and the lowering of the annual guidance. There are lots of reasons to be concerned about Hewlett-Packard."
The technology bellwether said net profit for its fiscal first quarter ended January 31st fell to $1.85 billion, or 75 cents a share, from $2.13 billion, or 80 cents a share, in the year-ago period.
Excluding items, HP earned 93 cents a share, matching average analyst estimates, according to Reuters Estimates.
HP said it was committed to a lower cost structure, and Hurd said the company would be taking out more in costs in 2009 than it has in previous years. It plans to reduce base pay and some benefits in the current quarter.
HP said the integration of technology services provider EDS - which it bought last year for $13.2 billion -- is running ahead of schedule, and it has so far reduced 9,000 of the 24,700 positions outlined in its restructuring plan.
Reuters