Market to HP: DISAPPOINTED
With the Dow near its lowest point in a decade and global PC shipments down for the first time since 2002, according to market research firm IDC, Hewlett-Packard (HPQ) reported fiscal first-quarter earnings today, and though they met Wall Street’s expectations, they were not what the market had been hoping for. Shares in the world’s largest technology company slipped in after-hours trading, dragged down by news of a fiscal first-quarter profit that fell 13 percent from a year ago and by HP’s admission that all but one of its divisions suffered sharp year-over-year revenue drops. The company’s somber second-quarter forecast didn’t help matters either. HP estimates that second-quarter FY09 revenue will decline approximately two to three percent from a year earlier. The forecast for the next quarter and the full fiscal year “assumes that first-quarter market conditions will persist,” the company said.
Clearly, the global slowdown in tech spending is taking its toll on the company, though CEO Mark Hurd insists otherwise. Said Hurd, “HP is a market leader executing well in a tough market.”
Analysts begged to differ. “PC revenue declined 19 percent, server storage declined 18 percent, year over year,” Pacific Crest Securities analyst Brent Bracelin told Reuters. “Their printer hardware business declined more than 30 percent, year over year. The pace of the erosion in hardware was more severe than we expected….They did a good job of managing expenses in the quarter, but as you think about the fundamentals here going forward, they lowered their guidance from a revenue and profitability standpoint, and certainly we don’t have a ton of confidence, given the pace of erosion in their business. There could be further erosion from here.”