HP faces uncertain future
The world's largest computer maker last week said consumer PC sales in the three-month period ended 30 April dropped more than 20% from the same quarter last year, and startled analysts by forecasting that its revenue this year would be lower than previously expected.
The chilly outlook ignited a sell-off among the company's investors, and the stock dropped close to 10% early in the day before recovering slightly to close at $36.91, a loss of 7.3%.
In addition to weak PC sales, HP cited an array of issues that were slowing the company, including manufacturing problems resulting from the Japan earthquake and consumers' growing interest in tablet computers, a market in which HP has lagged rivals.
Getting in another jab at Mark Hurd, HP CEO Leo Apotheker blamed his predecessor for under-investing in the company's services business, says The Wall Street Journal.
That segment, which drives 28% of revenue and 35% of operating profit, is proving the latest disappointment for HP investors.
Hurd's cost cuts maximised profit, providing pep for the stock. They also left HP in poor position to compete in higher margin and faster growing segments of the business where the likes of IBM, Accenture and Indian outsourcers dominate.
Caris & Co analyst Rob Cihra cut his rating on the shares to 'Below Average' from 'Average', states Bloomberg BusinessWeek.
He says the company faces limitations to growth because of faltering demand for personal computers, adding that this year's earnings per share would be entirely driven by the company buying back shares, which reduce the number in circulation and concentrate profits.
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