Memo on HP Services Unit Spurs Stock Drop

Shares of Hewlett-Packard Co. dropped nearly 2% after an internal memo surfaced saying revenue and profit in the company’s services division were “well below plan.”

The memo from Ann Livermore, who heads the services division, was sent Monday, a day before stockholders voted on HP’s contested acquisition of Compaq Computer Corp., a deal now valued at $19.5 billion. HP claims to have a “slim but sufficient” edge in the voting, which could take weeks to certify.

Livermore wrote that orders for HP’s technology services were very soft, calling it a “cause for concern,” according to the memo, which was obtained by Dow Jones Newswires. She said HP’s proxy fight over the Compaq deal had been a potential distraction for employees and customers.

A bad quarter in services could have a big effect on the entire company. Services brought in 17% of HP’s $45 billion in revenue last year and grew 6%, while sales declined in the company’s computing systems division and in its “crown jewel,” the imaging and printing business.

HP spokeswoman Rebeca Robboy said Livermore’s memo was a routine quarterly update to rally her troops and that HP felt no need to update its financial guidance to Wall Street. HP shares fell 35 cents to close at $18.15 on the NYSE.