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H-P Forecast Falls Short Amid PC Buying Slump

Monday, 21 Nov 2011 04:42 PM

Hewlett-Packard Co. forecast first-quarter profit that missed analysts’ estimates, a sign that Chief Executive Officer Meg Whitman may struggle with the slump that led to the ouster of her predecessor, Leo Apotheker.

Profit for the quarter ending in January will be 83 cents to 86 cents a share, excluding some items, the company said in a statement. The average estimate of analysts surveyed by Bloomberg was for $1.11 a share.

Hewlett-Packard is suffering as some consumers shun personal computers and businesses curtail spending on technology services. Apotheker was replaced by Whitman on Sept. 22 after slashing forecasts three times in less than a year and jarring investors with a decision to explore spinning off the PC unit.

“People are looking for signs of stabilization even in their largest businesses, and some plans to return these businesses to growth,” said Chris Whitmore, an analyst at Deutsche Bank in San Francisco who has a “sell” rating on the shares.

The company’s Aug. 18 announcement that it would buy software maker Autonomy Corp. for $10.3 billion is adding to Hewlett-Packard’s debt, Whitmore said.

Whitman is working to integrate Autonomy and on Oct. 27 said she’ll keep the PC business in house. Now, she is resetting Wall Street’s expectations for next year.

Profit excluding certain items for fiscal 2012, which began Nov. 1, will be at least $4 a share, missing the average forecast for profit of $4.58. Hewlett-Packard fell $1.13, or 4 percent, to $26.86 at 4 p.m. in New York. The shares have lost 36 percent this year.

Fourth-Quarter Profit

Profit excluding some items for the fiscal fourth quarter, which ended Oct. 31, was $1.17 a share, and sales fell to $32.1 billion. Analysts had expected $1.13 in profit on sales of $32.1 billion.

Like its competitor Dell Inc., Hewlett-Packard is coping with flooding in Thailand that’s constrained the world’s supply of hard disk drives used in PCs.

Whitman, former CEO of online commerce pioneer EBay Inc., has begun reversing strategies pursued by Apotheker, including abandoning the PC spinoff plan. She also shares management responsibilities with Executive Chairman Ray Lane and is expanding the company’s board.

On Nov. 17, Hewlett-Packard appointed activist shareholder Ralph Whitworth to its board to help shore up investor confidence shaken by strategy shifts and slashed sales forecasts.

Whitworth, whose firm oversees $6.5 billion, told management his appointment would burnish credibility and that he’d press for share buybacks, higher dividends or more investment in research and development, a person with knowledge of the talks said.


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Hewlett-Packard Co. forecast first-quarter profit that missed analysts estimates, a sign that Chief Executive Officer Meg Whitman may struggle with the slump that led to the ouster of her predecessor, Leo Apotheker.Profit for the quarter ending in January will be 83 cents...
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Monday, 21 Nov 2011 04:42 PM
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