Business news from the Finally Fast team
Three leaked memos from Hewlett-Packard Co. CEO Leo Apotheker highlight concerns about the company’s growth strategy and the challenges facing its new leader. In the two memos that reached the press, Apotheker notified HP execs of upcoming cost-cutting measures for the company, telling them to “watch every penny and minimize all hiring” and said the firm’s current workforce plans were “unaffordable given the pressures on our business.”
Reports of the May 4 missive from Apotheker to his top executives surfaced late Monday, resulting in HP shares suffering a drop. In response, the 72 year-old company moved up its earnings report from Wednesday afternoon to Tuesday morning.
Meanwhile, HP is still recovering from the trauma of the management scandal that brought about the sacking of Apotheker’s predecessor, Mark Hurd, in August, and led to the replacement of a third of HP’s board.
HP’s stock had already fallen nearly 20 percent since the last earnings announcement in February, in which the company disclosed falling revenue from personal computers and services. The falling sales led to lower-than-expected guidance. HP predicted $130 billion to $131.5 billion in revenue for the year. The company’s shares sank, lopping some $17 billion off HP’s market value.
In a news release that went out late Monday, HP did not provide a reason for issuing its earnings report a day ahead of schedule.
HP reported earnings of $2.3 billion, or $1.05 per share, for the three months that ended April 30. That’s up from $2.2 billion, or 91 cents per share, in the same time last year. Excluding special items, HP earned $1.24 per share in the fiscal second quarter. Revenue climbed 3 percent to $31.63 billion, slightly above Wall Street expectations of $31.55 billion. Yet HP now expects earnings of $5 per share for the year, short of its earlier predictions of between $5.20 to $5.28 per share, and below Wall Street expectations of $5.24.
The company also lowered its 2011 revenue guidance range slightly, to between $129 billion and $130 billion. In February it had forecast revenue of $130 billion to $131.5 billion. Analysts are predicting $130.47 billion.
The company’s outlook for the current quarter also left investors wanting. HP is forecasting adjusted earnings of $1.08 per share and revenue between $31.1 billion and $31.3 billion. Wall Street was looking for adjusted earnings of $1.23 cents per share and $31.84 billion in revenue.
In addition to the earthquake and weak consumer PC sales, HP warned of falling operating profits from technical services, one of its most important businesses. This segment faces growing competition from smaller companies offering technology outsourcing and other services. Shares of the Palo Alto, California company fell $2.13 to $37.67 in premarket trading.