H-P tanks as Whitman sees more pain ahead
Shares fall 13% to its lowest level in 10 years in big selloffOctober 03, 2012|Benjamin Pimentel, MarketWatch
H-P (US:HPQ) stock shed 13% to close at $14.91, hitting its lowest level since Nov. 2002 after the company issued an earnings forecast that one analyst said was “much worse than expected.”
The shares already have slumped more than 40% this year, and Wednesday’s was the largest one-day percentage drop since last August.
Whitman said the company sees the coming fiscal year as “a fix and rebuild year” when the Palo Alto, Calif.-based company will see “broad-based profit decline,” though “more contained” than in fiscal year 2012.
But she pointed to fiscal 2015 as the company’s “year of acceleration.”
For fiscal 2013, the company said it expects adjusted earnings of $3.40 to $3.60 a share. Analysts on average were expecting earnings of $4.18 per share, according to Thomson Reuters.
Sterne Age analyst Shaw Wu told MarketWatch the forecast was “much worse than expected. … There was hope they would guide to $4 in EPS, keeping it flat.”
Barclays analyst Ben Reitzes wrote that H-P’s guidance “will likely exacerbate concerns about the structural headwinds ahead of H-P.”
In a note, Topeka Capital’s Brian White wrote: “Given this weak outlook, the stock is selling off, but we believe there remains more downside potential.”
H-P pointed to many challenges going forward. The company said it expects its IT-services revenue to fall 11% to 13% in the new fiscal year, underscoring the challenges the company is facing in that business.
However, H-P touted its initiatives in PCs, a market where it is dominant but struggling with slower growth and stiffer competition from Lenovo.
Some analysts have said the company should consider shedding that business. But H-P executives spent Wednesday highlighting its new PC products, including a new tablet for businesses.
In fact, despite the view of some analysts that H-P should spin off some of its businesses, mainly PCs and printers, Whitman affirmed the company’s strategy of competing in both the consumer and corporate markets. She touted what she said was “a balanced portfolio of businesses,” noting how each business “meaningfully contributes to our operating profit and cash flow.”
Whitman blamed the company’s troubles on the series of major management changes, which she said “caused multiple inconsistent strategic plans and executional miscues.”
Whitman took over in September last year after a turbulent period at the Silicon Valley giant. She replaced ex-CEO Leo Apotheker whose term was marred by confusion over strategy.
Apotheker was named chief executive in late 2010 after the sudden exit of ex-chief Mark Hurd, who left amid allegations of improper behavior, including a sexual-harassment claim.
Whitman said the company’s problems are “fixable, but it’s going to take some time.”See slide show: H-P struggles to find its way.
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