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HP Shares Tank as Apotheker Cuts Revenue Forecast

New CEO Has Tough First Quarter at the Helm

HP started tanking within seconds of posting the results of CEO Léo Apotheker's first quarter with the company Tuesday.

The company delivered better-than-expected earnings, up 16%, but its revenues fell short of the mark and it cut back its revenue guidance for this year by $2 billion, casting a shadow over its growth potential.

So its stock dropped 12% after-hours to land around $42.40 on a day the market was beset by the turmoil in oil-rich Libya and Bahrain that unleashed the specter of $4- or $5-a-gallon gas and kicked the stuffing out of most techs.

Apotheker blamed weak consumer PC sales, including issues in China, and soft valued-added services contracts for his fiscal first quarter showing and its limpness going forward. Both segments came in below HP's projections.

He wrote off the PC slump as a "market-driven event."

He also denied a widely repeated DigiTimes story that the company would field its TouchPad webOS tablet ahead of schedule in mid-March or April, making it more competitive with Apple, which is reportedly going to unveil its iPad 2 on March 2, and the coming onslaught of Android 3.0 tablets.

Apotheker said TouchPad's summertime schedule hasn't changed.

HP earned $1.36, or $2.6 billion, in the January quarter on revenues of $32.3 billion, up 4% year-over-year, but it was expected to make $1.29 on $32.96 billion.

It said it expected revenues of $31.2 billion-$31.6 billion this quarter, against Wall Street expectations of $32.59 billion, and said it should realize $1.19-$1.21 a share when $1.25 was expected.

For the year it now figures it can do $5.20-$5.28, up from $5.16-$5.26, on a pared-back $130 billion-$137 billion, down from an estimate a few months ago of $132 billion-$133.5 billion. Analysts expected $5.45 on $132.97 billion. HP says it's being "prudent."

Sanford Bernstein analyst Toni Sacconaghi said it was the lowest guidance since the Great Recession and the back half is loaded above any normal range.

HP claimed it gained market share in networking against Cisco in the January quarter. Revenues from its enterprise servers, storage and networking were up 22% year-over-year. Routing and switching specifically were up 13%. Industry standard servers were up 17%. Printing was up 7%.

PCs were down 1.3% in the quarter, with HP's consumer PC business down 12%, while the business side was up 11%. Enterprise services were off 2%.

The issue was project-related short-term signings in services, which are expected to dip below the seasonal average this quarter but pick up again in the second half, with growth in the low single digits.

HP also wrote off a component pricing benefit this quarter.

Apotheker, who suffers from comparison with ousted HP CEO Mark Hurd, is supposed to lay out his strategy for the company on Monday, March 14 in San Francisco, as previously reported.

He is expected to focus on software, which he said Tuesday would grow both "organically and inorganically," indicated more acquisitions.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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