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February 23, 2011, 3:26 AM EST
By Aaron Ricadela
(Updates with German trading in first, fifth paragraphs.)
Feb. 23 (Bloomberg) -- Hewlett-Packard Co. tumbled as much as 13 percent in German trading after its forecast missed analysts’ sales and profit estimates, a shortfall it blamed on sluggish demand for services and consumer products.
Excluding some costs, second-quarter profit will be as much as $1.21 a share, the Palo Alto, California-based company said yesterday in a statement. That missed the $1.26 predicted by analysts in a Bloomberg survey. Sales will top out at $31.6 billion, compared with an average estimate of $32.6 billion.
The outlook marred Leo Apotheker’s first quarter as chief executive officer and underscored two main challenges he’ll face at HP. The company’s reliance on home-computer shoppers, which generate 40 percent of PC revenue, has left HP vulnerable to a consumer slump, said Abhey Lamba, an analyst at ISI Group. The services unit, meanwhile, is looking for ways to better capitalize on a shift to cloud computing -- the notion of delivering applications over the Web.
“They will probably remain in the penalty box until we get more clarity about what’s going on,” Lamba said. The New York- based analyst has a “buy” rating on HP shares, which he doesn’t own.
HP, the world’s bigger computer maker, fell more than 12 percent to the equivalent of $42.40 as of 9:18 a.m. in Frankfurt. The share slid as much as $6.23 to $42 in extended trading in the U.S. yesterday following its earnings report. The shares had climbed 15 percent this year.
Annual Sales
For the full year, HP cut its sales forecast to $131.5 billion on the high end, down from as much as $133.5 billion. Analysts had estimated $133.1 billion. Excluding some costs, earnings will be $5.20 to $5.28 a share, the company said. The midpoint of that range was in line with projections.
HP, which gets about a third of its sales from Europe, the Middle East and Africa, was hurt by a slow recovery in that region. It’s also working to fix quality problems with its computers in China, the company said.
Apotheker, who took over Nov. 1, will present his broader strategy at an event in San Francisco on March 14. He has vowed to rely more on research and development to reinvigorate growth. That contrasts with former CEO Mark Hurd, who cut costs to boost profitability and stock performance during his five-year term.
Fiscal first-quarter net income rose 16 percent to $2.6 billion, or $1.17 a share, from $2.25 billion, or 93 cents, a year earlier, the company said yesterday. Excluding some costs, profit was $1.36 a share in the period, which ended Jan. 31.
Sales rose 3.8 percent to $32.3 billion. Analysts were projecting profit of $1.29 and sales of $33 billion on average.
‘Isolated Areas’
“We have isolated areas we need to improve,” Apotheker said during a conference call with analysts. Sales of PCs to consumers declined 12 percent in the first quarter, and total personal systems group revenue fell 1 percent to $10.4 billion.
Services revenue dropped 2 percent to $8.61 billion. Apotheker said that division had a “mixed performance” and that the company would seek more lucrative cloud-computing contracts.
Corporate PC sales remain strong, as customers replace aging computers with newer models, Apotheker said. Even as HP spends more on research and development, the company will keep a “watchful eye” on expenses, he said.
“We are in the mid-innings, to use the American expression,” said Apotheker, who worked in Europe before joining HP. “This market still has some legs.”
Gartner Inc., a market research firm, forecasts that worldwide PC shipments will increase almost 16 percent this year to 409 million units.
Board Shake-Up
To put HP on a new course, Apotheker and Chairman Ray Lane have shuffled the board and turned to acquisitions to expand in software. They’re also aiming to strengthen HP’s hand in the burgeoning markets for smartphones and tablet computers.
On Jan. 20, HP replaced four board members and added a new director. The appointments include former EBay Inc. CEO Meg Whitman and former Alcatel-Lucent SA CEO Patricia Russo.
On the acquisition front, HP purchased business- intelligence software maker Vertica Feb. 14 for an undisclosed amount. That followed a decision to discontinue the company’s own data-analysis program, called NeoView. Vertica’s customers include Twitter Inc., Zynga Inc. and Groupon Inc.
Later this year, HP will introduce a TouchPad tablet computer based on the WebOS operating system, gained in last year’s $1.2 billion acquisition of Palm Inc. The company introduced new smartphones running the software on Feb. 9.
HP also is dealing with a flaw in new chips from Intel Corp., the main supplier of PC processors. Earlier this month, HP said it had stopped making computers with the chips and put a hold on shipping affected inventory.
Investors shouldn’t take HP’s results and forecast as a referendum on Apotheker’s performance after only a single quarter, said Kaushik Roy, an analyst at Wedbush Securities in Los Angeles.
“It’s too early to point fingers,” said Roy, who has an “outperform” rating on the shares and doesn’t own them.
--With assistance by Ian King in San Francisco. Editors: Nick Turner, Tom Giles
To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
(Updates with German trading in first, fifth paragraphs.)
Feb. 23 (Bloomberg) -- Hewlett-Packard Co. tumbled as much as 13 percent in German trading after its forecast missed analysts’ sales and profit estimates, a shortfall it blamed on sluggish demand for services and consumer products.
Excluding some costs, second-quarter profit will be as much as $1.21 a share, the Palo Alto, California-based company said yesterday in a statement. That missed the $1.26 predicted by analysts in a Bloomberg survey. Sales will top out at $31.6 billion, compared with an average estimate of $32.6 billion.
The outlook marred Leo Apotheker’s first quarter as chief executive officer and underscored two main challenges he’ll face at HP. The company’s reliance on home-computer shoppers, which generate 40 percent of PC revenue, has left HP vulnerable to a consumer slump, said Abhey Lamba, an analyst at ISI Group. The services unit, meanwhile, is looking for ways to better capitalize on a shift to cloud computing -- the notion of delivering applications over the Web.
“They will probably remain in the penalty box until we get more clarity about what’s going on,” Lamba said. The New York- based analyst has a “buy” rating on HP shares, which he doesn’t own.
HP, the world’s bigger computer maker, fell more than 12 percent to the equivalent of $42.40 as of 9:18 a.m. in Frankfurt. The share slid as much as $6.23 to $42 in extended trading in the U.S. yesterday following its earnings report. The shares had climbed 15 percent this year.
Annual Sales
For the full year, HP cut its sales forecast to $131.5 billion on the high end, down from as much as $133.5 billion. Analysts had estimated $133.1 billion. Excluding some costs, earnings will be $5.20 to $5.28 a share, the company said. The midpoint of that range was in line with projections.
HP, which gets about a third of its sales from Europe, the Middle East and Africa, was hurt by a slow recovery in that region. It’s also working to fix quality problems with its computers in China, the company said.
Apotheker, who took over Nov. 1, will present his broader strategy at an event in San Francisco on March 14. He has vowed to rely more on research and development to reinvigorate growth. That contrasts with former CEO Mark Hurd, who cut costs to boost profitability and stock performance during his five-year term.
Fiscal first-quarter net income rose 16 percent to $2.6 billion, or $1.17 a share, from $2.25 billion, or 93 cents, a year earlier, the company said yesterday. Excluding some costs, profit was $1.36 a share in the period, which ended Jan. 31.
Sales rose 3.8 percent to $32.3 billion. Analysts were projecting profit of $1.29 and sales of $33 billion on average.
‘Isolated Areas’
“We have isolated areas we need to improve,” Apotheker said during a conference call with analysts. Sales of PCs to consumers declined 12 percent in the first quarter, and total personal systems group revenue fell 1 percent to $10.4 billion.
Services revenue dropped 2 percent to $8.61 billion. Apotheker said that division had a “mixed performance” and that the company would seek more lucrative cloud-computing contracts.
Corporate PC sales remain strong, as customers replace aging computers with newer models, Apotheker said. Even as HP spends more on research and development, the company will keep a “watchful eye” on expenses, he said.
“We are in the mid-innings, to use the American expression,” said Apotheker, who worked in Europe before joining HP. “This market still has some legs.”
Gartner Inc., a market research firm, forecasts that worldwide PC shipments will increase almost 16 percent this year to 409 million units.
Board Shake-Up
To put HP on a new course, Apotheker and Chairman Ray Lane have shuffled the board and turned to acquisitions to expand in software. They’re also aiming to strengthen HP’s hand in the burgeoning markets for smartphones and tablet computers.
On Jan. 20, HP replaced four board members and added a new director. The appointments include former EBay Inc. CEO Meg Whitman and former Alcatel-Lucent SA CEO Patricia Russo.
On the acquisition front, HP purchased business- intelligence software maker Vertica Feb. 14 for an undisclosed amount. That followed a decision to discontinue the company’s own data-analysis program, called NeoView. Vertica’s customers include Twitter Inc., Zynga Inc. and Groupon Inc.
Later this year, HP will introduce a TouchPad tablet computer based on the WebOS operating system, gained in last year’s $1.2 billion acquisition of Palm Inc. The company introduced new smartphones running the software on Feb. 9.
HP also is dealing with a flaw in new chips from Intel Corp., the main supplier of PC processors. Earlier this month, HP said it had stopped making computers with the chips and put a hold on shipping affected inventory.
Investors shouldn’t take HP’s results and forecast as a referendum on Apotheker’s performance after only a single quarter, said Kaushik Roy, an analyst at Wedbush Securities in Los Angeles.
“It’s too early to point fingers,” said Roy, who has an “outperform” rating on the shares and doesn’t own them.
--With assistance by Ian King in San Francisco. Editors: Nick Turner, Tom Giles
To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net