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Hewlett-Packard (HPQ) Tumbles After Earnings Forecast Lags Estimates, Revenue Miss

 November 20, 2012 07:55 AM

(By Balachander) Hewlett-Packard Co. (NYSE: HPQ) shares tumbled in premarket trading on Tuesday after the world's largest seller of personal computers issued a downbeat earnings forecast following weaker-than-expected quarterly revenue.

On a non-GAAP basis, earnings per share (EPS) fell 1 percent to $1.16 from $1.17 in the same period of last year, yet topped Wall Street projections of $1.14 for the fourth quarter. The company posted a GAAP loss of $6.9 billion due to restructuring and goodwill impairment charge of $8.8 billion.

Revenue declined 7 percent to $30 billion, more than consensus estimate of a 5.3 percent drop to $30.43 billion for the fourth quarter.

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HP's revenue has been falling for the past four quarters as dwindling sales of PCs coupled with a shortage of hard disk drives (HDD) taking a toll on its results. Meg Whitman, who was appointed as HP CEO in September 2011, has been making sweeping organizational changes for the past one year in a bid to make HP a leaner and meaner company.

Segment wise, Personal Systems Group revenue declined 14 percent with desktop and notebook units falling 12 percent. Services revenue fell 6 percent. Imaging and Printing Group (IPG) revenue dropped 5 percent. Revenue at Enterprise Servers, Storage and Networking (ESSN) - which accounts for 16 percent of HP's topline - fell 9 percent. Software revenue, meanwhile, jumped 14 percent.

Looking ahead for the first quarter, HP forecasts non-GAAP EPS in the range of $0.68 to $0.71, trailing analysts expectations of $0.85.

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For the full year 2013, the company still expects non-GAAP EPS in the range of $3.40 to $3.60, while analysts expect $3.52.

For HP Enterprise Services, the company had said it expects a drop in revenue of 11 percent to 13 percent for 2013 with operating margins between 0 and 3 percent. At HP's Printing and Personal Systems, the company plans to reduce the number of SKUs in the printing business by 30 percent and the number of platforms in the PC business by 25 percent by the end of 2014.

In May, HP said it would cut about 27,000 jobs by the end of fiscal year 2014 as part of a restructuring drive that is expected to generate annualized savings of $3.0 billion to $3.5 billion, majority of which will be reinvested back into the company.

The stock, which has been trading in a 52-week range of $12.36 to $30.00, fell 7.52 percent to trade at $13.30 in premarket trading on Tuesday.

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