HP RELEASES Q2, BUT EARLY MEMO LEAK SENDS STOCKS PLUMMETING

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Date: Wednesday May 18, 2011 10:33:47 am
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    HP RELEASES Q2, BUT EARLY MEMO LEAK SENDS STOCKS PLUMMETING

    COMPUTER AND PRINTER MAKER HP has released its second fiscal quarter results a day early after a leaked memo from its CEO, Leo Apotheker, suggested that things have not been going so well for the company.The results are generally positive, with HP bringing in net revenue of $31.6bn, a three per cent increase on the $30.8bn revenue for the same quarter in 2010.Net income was up five per cent from $2.2bn to $2.3bn. Cash flow from operations was up by 28 per cent.Diluted earnings per share were up from $0.91 to $1.05, an increase of 15 per cent, according to GAAP figures, and up from $1.09 to $1.24, a jump of 14 per cent according to non-GAAP accounting.

    HP’s enterprise, storage and networking sector saw strong revenue growth of 15 per cent, while its software and financial services sectors both saw sales growth of 17 per cent. Its printing and services divisions grew by five and two per cent, respectively, but it’s computer group saw a revenue decline of five per cent.

    The earnings might be better than many investors expected after Apotheker’s ominous memo to top executives warned of "another tough quarter" as the company struggles to sell new products to pump up revenue and profits.

    The problem for HP is its forecast for the rest of the year, which looks grim after it revised its outlook downward. The company expects to bring in revenue of between $129bn to $130bn, compared to a previous forecast of between $130bn to $131.5bn. Non-GAAP diluted earnings per share are also expected to take a hit, falling from a potential high of $5.28 to $5.00 per share.

    The memo was leaked to Bloomberg and also asked executives to "watch every penny and minimise all hiring", words that are not confidence-inspiring for investors. There were also warnings over the company’s staff numbers being "unaffordable" and suggestions that plans are being drawn up to address this. It’s possible that we will see job cuts at HP as a result.HP’s stock suffered after the memo leaked and it seems that the release of earnings a day early has done little to calm investors. At the time of writing its shares are down $2.09 to $37.71, a drop of 5.25 per cent.

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