HP Confirms Concern Over Results in 4th Quarter, Citing Weak Sales
Is Hewlett-Packard going back to the bad old days?
The world’s No. 2 computer maker confirmed late Wednesday that it may have trouble meeting fiscal fourth-quarter earnings estimates, accelerating in after-hours trading a stock decline that began early in the day.
The company’s shares slumped $9.63 to an eight-month low of $67, although the tech sector overall finished just modestly lower.
For much of 1997 and 1998, HP disappointed investors quarter after quarter by missing earnings targets, in part because of weaker sales across Asia.
HP stock essentially went nowhere in that two-year stretch. But this year, the company’s results improved sharply, helping to send the stock to a record $118.44 by July.
Earlier this month, HP Chief Executive Carly Fiorina told analysts in a conference call that despite some sales worries, she thought the company had a “decent shot†of meeting fourth-quarter estimates, which at that point averaged 99 cents a share.
Late Wednesday, however, HP confirmed that it had spoken individually to different analysts, and told them that weak North American computer server sales could weigh on results for its fiscal fourth quarter ending Sunday.
Earlier in the day, several brokerages cut estimates. Merrill Lynch trimmed its fourth-quarter estimate to 73 cents a share from 78 cents.
BancBoston Robertson Stephens analyst Dan Niles lowered his estimate for the quarter to 73 cents from 82 cents and his fiscal year 2000 estimate to $3.20 from $3.30.
Sales of Unix servers, which run networks of computers, are falling because of competition from Sun Microsystems, analysts said. HP customers also might be delaying purchases because of concerns about the year 2000 computer glitch, analysts said--an explanation that IBM used last week in warning of weaker earnings near-term.
Also, HP said that last month’s earthquake in Taiwan had disrupted personal computer production and limited the potential for any positive surprises in that business during the quarter.
Earnings jitters also hit Intel Corp. on Wednesday, sending its shares down $2 to $69.44.
Analyst Jonathan Joseph at Salomon Smith Barney said Intel might still face problems filling orders for its new chips. A production shortfall led to disappointing third-quarter earnings, which Intel reported Oct. 13.
“We are getting multiple reports that Intel is still having some manufacturing issues this quarter and is having trouble meeting all the commitments it made to customers,†Joseph said in a report Wednesday.
He lowered his fourth-quarter earnings estimate by 5 cents to 59 cents a share and the 2000 estimate to $2.65 from $2.85.
Intel spokesman Howard High said the company isn’t having manufacturing problems, though “there is some tightness in various supplies because people want to buy more than we can make.â€
“We have said that the fourth quarter will be stronger than the third quarter,†he added.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
HP’s Dive
Shares of Hewlett-Packard plunged $9.63 to $67 on Wednesday after the technology giant warned about near-term earnings. Monthly closes and latest on the New York Stock Exchange:
*
Wednesday: $67
Source: Bloomberg News
