Hewlett-Packard Warns of a Disappointing Quarter
Hewlett-Packard Co. said Wednesday that its fiscal second-quarter profit will fall short of analysts’ expectations, hurt by falling prices for its personal computers and slower sales of measurement devices in Asia.
HP said it expects to earn 65 cents a diluted share in the quarter ended April 30, including charges of 8 cents to 10 cents a share. Analysts had expected the company to earn 78 cents a share, according to IBES International Inc.
The warning indicates that Hewlett-Packard isn’t immune to the PC price cuts that have hurt rivals, including No. 1 PC maker Compaq Computer Corp.
The Palo Alto-based company has repeatedly posted disappointing earnings in recent quarters, but investors have driven HP’s shares up 32% in the last three months on optimism that the company was faring better in the PC wars.
In fact, HP stock hit a record high Wednesday, surging $1.75 to close at $81.63 on the New York Stock Exchange before the announcement.
“PCs aren’t a fabulous business this year,” said Kim Brown, an analyst at research firm Dataquest. “HP needs a growth vehicle, and they are struggling to find it.”
HP will report second-quarter earnings Friday. The company earned $784 million, or 75 cents a diluted share, a year ago.
In its statement, the company also said profit was hurt by economic weakness in Asia, especially in its measurement-systems business, where products have higher gross margins than in some other businesses.
The shortfall will be the eighth time in nine quarters that HP has missed analysts’ estimates. Its earnings fell short of estimates in the first quarter because of price cuts in the printer market, which accounts for a third of HP’s profit.
“While we did achieve good revenue and order growth this quarter, we are disappointed that our early calculations show earnings per share coming in well short of expectations,” Chairman and Chief Executive Lewis Platt said in a statement.
On a conference call with analysts after the warning, HP officials said revenue increased 16% and orders rose about 12%.
Many analysts have raised their ratings on the stock in recent weeks on optimism about stronger PC and printer sales.
