Computer maker reports disappointing results early, warns 4Q will miss target as well.
August 12, 2004: 9:49 AM EDT
NEW YORK (CNN/Money) - Computer and computer printer maker Hewlett-Packard Co. reported much weaker-than-expected fiscal third-quarter results Thursday and warned that it'll miss fiscal fourth-quarter forecasts as well.
The company, in an earnings report a week earlier than expected, said it earned $728 million, or 24 cents a share, excluding special items, up from the $700 million, or 23 cents a share, it earned on that basis a year earlier.
Analysts surveyed by earnings tracker First Call had forecast earnings per share of 31 cents in the period.
The company also warned that fiscal fourth-quarter earnings per share excluding special items will be between 35 and 39 cents, compared with 36 cents a year earlier. First Call's forecast was for EPS of 43 cents, with a range of estimates from 41 to 47 cents.
Shares of HP (HPQ: Research, Estimates), a component of the Dow Jones industrial average, plunged nearly $3, or about 14 percent, to $16.80 in early morning trading Thursday following the report. Shares are now down more than 25 percent this year.
HP's warning is the latest in a series of disappointing results from large tech firms. Cisco Systems, the largest maker of networking equipment, gave tepid sales guidance for its fiscal first quarter Tuesday. Chip manufacturer National Semiconductor issued a sales warning on Tuesday as well.
It appears that the recent weakness in the overall economy is taking its toll on tech companies.
"The economy did a little bit of a stutter step and that is why we did not see the normal acceleration in demand towards the end of the quarter," said HP Chairman and CEO Carly Fiorina during a conference call with analysts Thursday morning.
But HP also blamed its disappointing third-quarter results on company specific problems in its enterprise servers and storage unit, which it said overshadowed good results in its personal computers, printers, software, imaging and software divisions.
It said it had made immediate management changes to address the problems, although it did not detail the changes. It said the problems revolved around changing to a new order processing and supply chain system that proved more difficult and expensive than expected, problems with its European business and storage business sales significantly below plan.
The company said it is putting a new focus on improving profit margins in servers and storage, which would return the division to profitability in the fourth quarter. It lost about $208 million in the third quarter.
The company's revenue rose 9 percent to $18.9 billion, which also missed the First Call forecast of $19.0 billion. Without the changes in currency exchange rates, revenue would have been up only 5 percent.
The company issued fourth-quarter revenue guidance of $21.0 billion to $21.5 billion, roughly in line with the First Call forecast of $21.3 billion, with a range of estimates from $20.9 billion to $21.6 billion.
During the conference call, an analyst questioned HP executives as to why the new fourth-quarter earnings guidance was so far below forecasts when revenue guidance was roughly in line with expectations.
"This continues to be a challenging and somewhat unpredictable environment," said Fiorina. "Given our miss, we think it's prudent to be somewhat cautious."
Cisco was similarly cautious Tuesday. And there's a good chance that HP rival Dell, which will report its latest results after the bell Thursday, will also give a reserved outlook for the remainder of the year.
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