Hewlett-Packard Cuts Full-Year Forecasts as Consumers Hold Back Buying PCs

May 17 (Bloomberg) -- Abhey Lamba, an analyst with International Strategy & Investment Group, talks about Hewlett-Packard Co.'s second-quarter earnings reported today and outlook. The world's biggest personal-computer maker said earnings excluding some items were $1.24 a share. The company cut its sales and earnings forecast for the year. Lamba speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Hewlett-Packard Co. (HPQ) , the biggest personal-computer maker, cut a billion dollars from its sales forecast for the year and missed analysts’ profit projections as consumers shunned PCs and services margins narrowed.

Full-year sales will be $129 billion to $130 billion and earnings excluding some items will be at least $5 a share, Palo Alto , California-based Hewlett-Packard said in a statement today. Analysts estimated sales of $130.3 billion and earnings of $5.24, the average projections in a Bloomberg survey. Third- quarter forecasts from HP also missed analysts’ estimates.

The projections came a day after Bloomberg News reported Chief Executive Officer Leo Apotheker sent a memo warning of “another tough quarter” in the July period. The CEO’s second- straight disappointing forecast reflects rivalry from tablets such as Apple Inc.’s iPad and lower margins in services. Apotheker may be hard pressed to find savings after his predecessor, Mark Hurd , eliminated more than 48,000 jobs.

“The Street was willing to give Apotheker a get-out-of- jail-free card the first time,” said Pat Becker Jr., principal of Portland, Oregon-based Becker Capital Management Inc. , which holds Hewlett-Packard as part of its $2.5 billion in assets. “There was a belief on the Street that Hurd had pulled the expense-cutting string about as taut as you could pull it and the next guy had to come in with some vision and strategy.”

‘Watch Every Penny’

Hewlett-Packard dropped $2.89, or 7.3 percent, to $36.91 at 4 p.m. in New York Stock Exchange composite trading.

In February, HP predicted full-year sales of $130 billion to $131.5 billion and earnings of at least $5.20 a share.

In his May 4 message, Apotheker urged deputies to “watch every penny and minimize all hiring.” Following news of the missive sent via e-mail, Hewlett-Packard moved up its earnings report to this morning, rather than tomorrow afternoon.

For this quarter, earnings excluding some items will be $1.08 a share, the company said. That missed the $1.23-a-share average projection, the second straight quarter the company’s forecasts fell short. Revenue will be $31.1 billion to $31.3 billion, compared with analysts’ $31.8 billion average estimate.

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Hewlett-Packard Cuts Full-Year Forecasts as Consumers Hold Back Buying PCs

It needs to bulk up in services that help customers create software applications or outsource customer service, he said. “We have overinvested operationally and underinvested strategically,” he said. “It is my top focus going forward.



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