HP shares tumble on lower 2011 forecast, weak PC sales
HP (NYSE:HPQ), the world's largest technology company by revenue, saw its shares fall on Tuesday as the company again lowered its 2011 outlook, citing weak personal computer sales, the impact of the Japan quake and reduced operating profit in its services segment.
The Palo Alto, California-based company, the world's largest PC maker, reported its second fiscal quarter results a day earlier following a leaked memo from CEO Leo Apotheker yesterday, which told HP executives to cut expenses in preparation for another "tough quarter", according to reports from the Wall Street Journal.
For the three months ending April 30, the company reported net income of $2.3 billion, or $1.05 per share, compared to profits of $2.2 billion, or $0.91 per share, in the year-ago period.
Adjusted for restructuring and acquisition-related charges, as well as other items, HP posted net earnings of $1.24 per share, up 14% from the prior year quarter.
Net revenue of $31.6 billion was up 3%, or 1% when adjusted for the effects of currency, due to what it called "uneven" performance across all of its operations, with continued softness in consumer PCs across all geographies.
The company said the revenue growth was largely a result of commercial PC sales, which grew 13%, allowing HP to maintain its leadership position in the PC market, in terms of units, revenue and profit share, as businesses continued to spend on technology.
However, commercial growth was offset by a 23% decline in consumer client revenue, leading to an overall 5% fall in sales from the personal systems group.
Revenue from its core enterprise group, which includes sales from services, enterprise servers, storage and networking, as well as HP software, rose 7% to $15.3 billon.
The company said though that it expects to invest more in its services segment, specifically towards the migration to cloud computing, which is anticipated to cut into the unit's operating profit.
Revenue from outside of the US in the second quarter accounted for 66% of total HP revenue. HP saw accelerated growth in the BRIC countries (Brazil, Russia, India and China), with revenue increasing 19%.
Due to the second quarter results, HP decreased its adjusted full-year earnings guidance down to at least $5.00 per share, on revenue between $129 and $130 billion. In February, the company predicted earnings in the range of $5.20 to $5.28 per share, on revenue between $130 and $131.5 billion.
HP shares were down more than 9% on Tuesday morning, trading at $36.19 as of 11:50am EST.
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