Hewlett-Packard Cuts Full-Year Outlook, Anticipates 'Tough' Quarter

By Beecher Tuttle May 17, 2011

Hewlett-Packard shares fell by more than 4 percent in pre-market trading on Tuesday after the PC maker cut its full-year outlook and warned of a soft upcoming quarter.

The California-based company expects its full year sales to be between $129 billion to $130 billion with adjusted earnings of $5 per share, down from its February estimates of $5.20 to $5.28 per share and $130 billion to $131.5 billion in sales.

For the current quarter ending in July, H-P projects earnings of $1.08 per share on revenue of $31.1 billion to $31.3 billion. Those numbers will easily miss Wall Street estimates of $1.23 per share and $31.78 billion in sales.

The projections come one day after H-P chief executive Leo Apotheker reportedly sent a memo to his staff warning them of “another tough quarter.” The leaked note, dated May 4, also explained that upper management needs to “watch every penny and minimize all hiring.”

Hewlett-Packard moved up its earnings report from Wednesday afternoon to Tuesday morning following the news of the memo, which spooked investors.

The weak outlook for the full fiscal year was due, in part, to soft PC sales and the aftereffects of the Japanese earthquake and the following tsunami, according to the Associated Press.

“They probably have to do some cost cutting,” Kulbinder Garcha, an analyst at Credit Suisse AG in New York, told Bloomberg News. “They’ll have to drive for further efficiency. Can they do that easily? No, it’ll probably take some time.”

 Ironically, the soft full-year outlook comes on the same day that H-P posted better-than-expected second quarter earnings of $1.24 a share on $31.6 billion in revenue. Bloomberg analysts anticipated earnings of $1.21 a share and sales of $31.5 billion for the quarter ending in April. The company posted a net profit of $2.3 billion, up from $2.2 billion a year ago.

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Beecher Tuttle is a TechZone360 contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.

Edited by Jennifer Russell

TechZone360 Contributor

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