HP Again Trims Earnings Forecast
High-tech bellwether Hewlett-Packard Co. trimmed its earnings forecast again Wednesday and said it’s cutting as many as 3,000 management jobs, or about 3.5% of its work force, to deal with a worldwide sales slowdown.
When computer makers were fretting during the holiday season about weak sales in the United States, HP Chief Executive Carly Fiorina said her company probably would fare better because of its international presence. Nearly 56% of HP’s revenue comes from overseas.
However, Fiorina told analysts before the stock market opened Wednesday that the dramatic downturn in sales “has spread to other regions of the world, particularly Europe, and to a lesser degree Asia Pacific.”
Although PC buying was strong in Europe in 2000, “those gains evaporated in the first quarter,” she said. “We’re clearly feeling this sudden shift in consumer [information-technology] buying sentiment.”
Despite the gloomy forecast, HP shares rose $2.65, more than 9%, to close at $31.90, joining a broad rally on the New York Stock Exchange.
Palo Alto-based HP said it expects revenue in its second quarter, which ends April 30, to fall 2% to 4% from both the previous quarter and the comparable period a year ago. HP expects earnings of 13 cents to 17 cents a share.
That estimate includes about $150 million in one-time write-downs for excess inventory and capacity in printing and hand-held computers.
Analysts surveyed by First Call/Thomson Financial had been expecting earnings of 35 cents--although those estimates typically exclude the effect of one-time write-downs.
The consensus estimate had been 40 cents before HP warned in February that it was being hurt by the worsening economy.
Fiorina said those projections were based on the assumption there would be “no further deterioration in the U.S. economy” and “no significant slowdown internationally.”
HP’s poor outlook had previously led the company to defer pay raises and bonuses, but Fiorina said that measure will not continue.
Instead, the company will try other ways to reduce expenses, tightening control over discretionary spending and eliminating 3,000 of its 14,000 management positions.
That follows HP’s move in January to cut 1,700 marketing positions, a decision that got a lot of attention because the 62-year-old Silicon Valley institution traditionally has avoided layoffs.
The newly lowered outlook marks another difficult moment for Fiorina, who has been criticized for giving Wall Street high targets and then having to lower them. Last fall she stuck to a forecast that HP’s sales would rise 15% to 17% this year--in part because of expectations for strong overseas growth--before saying in February that double-digit growth was unlikely.
