Hewlett-Packard Co.'s shares plunged 13% to a nine-year low on Wednesday after Chief Executive Meg Whitman warned of an unexpectedly steep earnings slide in 2013, with revenue set to fall in every business division except software.
Wall Street had hoped for quicker signs of progress on Whitman's turnaround plan, which centers on transforming the former industry powerhouse into an enterprise computing corporation.
But Whitman, who took the helm of HP just over a year ago, told investors at an annual HP presentation that the company's recovery will start to become visible only in fiscal 2014, when investments begin to pay off.
She blamed unprecedented executive turnover in past years for dragging out the Silicon Valley company's turnaround.
"The big disappointment is stemming from the fact that things are expected to get worse" in fiscal 2013, RBC Capital Markets analyst Amit Daryanani wrote.
"The company intends to revert back to being a growth story. However, in the near term, earnings will get more challenging before they get better."
Shares in HP, the largest U.S. technology company by sales, ended down $2.23 at $14.90, according to unofficial closing numbers in New York, marking the biggest single-day decline since August 2011. The stock is one of the 30 components of the Dow Jones Industrial Average.
HP gave a particularly gloomy outlook for enterprise services, which provides services to corporations and is one of the company's the largest divisions and a key component of Whitman's rescue plan.
Revenue from enterprise services will dive 11 to 13 percent in fiscal 2013 and be barely profitable, with operating margins of 0 to 3 percent, HP said.
Whitman, who became HP's third CEO in as many years after taking the helm from an abruptly dismissed Leo Apotheker just over one year ago, is trying to revitalize the former industry icon via layoffs, cost cutting, and expansion into areas with longer-term potential such as enterprise computing services.
The company has lost almost two-thirds its value since 2010, squeezed by crumbling demand for personal computers in a mobile era and significant leadership turbulence. Its market value now stands just over $30 billion.
Longer term, "we expect to be a GDP-like growth company with key pockets of higher growth," Cathie Lesjak, HP's chief financial officer, said.
HP has been through years of turbulence. Apotheker's 11-month tenure was marked by an acceleration of departures from various divisions, such as networking chief Marius Haas, as he brought in former coworkers from SAP AG.
Apotheker's precedessor, Mark Hurd, who is now president of Oracle Corp, also departed abruptly, after a sexual harassment scandal.
"My belief is that the single biggest challenge facing Hewlett-Packard has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices, and frankly some significant executional miscues," Whitman told the investor conference in San Francisco.
"This is important because as a result it is going to take longer to right this ship than any of us would like," she added.
HP, like rival Dell Inc, is trying to transform itself into a major enterprise computing provider in the mold of IBM Corp, while slashing expenses to boost the bottom line.
Shares of Dell, the No. 2 U.S. PC maker after HP, fell 4.7 percent and were mired near nine-year lows on Wednesday.
HP is laying off 29,000 employees over the next two years and has written off $10.8 billion mostly related to the writedown of its EDS services business. Meantime, its business continues to be hit by a slowing in corporate spending and personal computer demand worldwide.
For 2013, the company forecast overall earnings, excluding restructuring charges and other items, at between $3.40 to $3.60 a share in fiscal 2013. That's well below the average forecast by Wall Street analyst of $4.18, according to Thomson Reuters I/B/E/S.
Whitman vowed to reduce the number of product offerings and to cut costs as HP tries to recover in a worsening macro-economic environment. She has said it will take five years for the turnaround to be effective.
"All of this is fixable but it is going to take some time," she said.
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