Hewlett-Packard Co. (HPQ), the world’s biggest personal-computer maker, cut a billion dollars from its sales forecast for the year and said profit is falling short as consumers hold back buying PCs.

Full-year sales will be $129 billion to $130 billion and earnings excluding some items will be at least $5 a share, Palo Alto, California-based Hewlett-Packard said in a statement today. Analysts estimated sales of $130.3 billion and earnings of $5.24, the average projections in a Bloomberg survey. Third- quarter forecasts from HP also missed analysts’ estimates.

The predictions came a day after Bloomberg News reported Chief Executive Officer Leo Apotheker had sent a downbeat memo warning his staff of “another tough quarter” in the period that ends in July. Apotheker urged deputies to “watch every penny and minimize all hiring” in the May 4 message. Following news of the memo, Hewlett-Packard moved up its earnings report to this morning, rather than the afternoon of May 18.

“They probably have to do some cost cutting,” said Kulbinder Garcha, an analyst at Credit Suisse AG in New York with an “outperform” rating on HP shares. “They’ll have to drive for further efficiency. Can they do that easily? No, it’ll probably take some time.”

In February, HP predicted full-year sales of $130 billion to $131.5 billion and earnings of at least $5.20 a share.

Hewlett-Packard dropped as much as $2.30, or 5.8 percent, to $37.50 in early trading. Following the news of the memo yesterday, the stock dropped as much as 5.1 percent in extended trading. The shares closed at $39.80 yesterday in regular New York Stock Exchange composite trading.

For the quarter through July, earnings excluding some items will be $1.08 a share, HP said. That missed the $1.23-a-share average projection, the second straight quarter HP’s forecasts fell short. Revenue will be $31.1 billion to $31.3 billion, compared with analysts’ $31.8 billion average estimate.

Apple Inc.’s iPad touch-screen computer and sales of smartphones are hurting demand for PCs, said Brent Bracelin, an analyst at Pacific Crest Securities in Portland, Oregon. The industry’s shipments declined 3.2 percent last quarter, research firm IDC reported in April.

In addition, HP’s technology-services business needs to prove it can tackle companies’ transition to cloud computing, in which applications and data are delivered through the Web, said Bracelin, who has a “sector perform” rating on HP shares.

The pressures facing HP “aren’t going away soon,” he said.

HP is speeding efforts to bring its technology services in line with the company’s strategy, Apotheker said in today’s statement. Earnings at HP’s services business fell to $1.36 billion in the second quarter, from $1.4 billion a year earlier. Sales increased 1.5 percent to $8.98 billion.

Sales in the personal systems group fell 5.4 percent to $9.42 billion as revenue from consumer PCs dropped 23 percent.

Second-quarter earnings, excluding some items, were $1.24 a share, while revenue was $31.6 billion. Analysts had estimated $1.21 a share and sales of $31.5 billion.

Net income rose to $2.3 billion, or $1.05 a share, from $2.2 billion, or 91 cents, the year earlier.

Apotheker, who joined as CEO on Nov. 1, gave his initial quarterly report in February, which was marred by a forecast that missed estimates. The shares plunged 9.6 percent the next day.

Dell Inc. (DELL), the second-largest U.S. PC maker, also reports its earnings today, in the afternoon.

By: DocMemory
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