Earnings Reports for Nov. 13

Hewlett-Packard Misses Estimates

Tech heavyweight Hewlett-Packard stunned Wall Street by reporting a big earnings shortfall before the market opened today and said it ended talks to buy the consulting business of PricewaterhouseCoopers.

The stock of the computer and printer maker fell more than 12 percent, weighing down markets in general following last week’s rout, which was spurred by a revenue warning from personal computer maker Dell Computer.

HP shares slumped $5 to $34-1/8, a low unseen since April 1999, helping to pull down the Dow Jones industrial average, which was off about 167 points in afternoon trading.

The Palo Alto, Calif.-based company reported fourth-quarter earnings far short of Wall Street expectations, citing margin pressures, adverse currency effects, higher-than-expected expenses, and business mix.

Hewlett-Packard Chairman, President and Chief Executive Officer Carly Fiorina said she was “very disappointed that we missed our [earnings per share] growth target this quarter due to the confluence of a number of issues that we now understand and are urgently addressing. I accept full responsibility for the shortfall.”

Hewlett-Packard also said it had terminated talks to buy the consulting business of PricewaterhouseCoopers.

The news of its earnings shortfall surprised Wall Street, which did not expect the company to report its fourth-quarter results until after the close of the market today.

Hewlett-Packard reported fiscal fourth-quarter earnings per share of 41 cents, excluding investment and divestiture gains and losses, the effects of stock appreciation rights and balance sheet translation, and restructuring expenses. Analysts had been expecting 51 cents per share, according to research firm First Call/Thomson Financial.

Including these items, the computer maker earned 45 cents per share on about 2.05 billion shares of common stock and equivalents outstanding. This compares with 36 cents in the same period 1999, adjusted for expenses related to the spin-off of Agilent Technologies and the incremental effect of a stock appreciations rights plan.

In regard to the planned $18 billion acquisition of PricewaterhouseCoopers’ service arm, Hewlett-Packard said the two companies were unable to reach a satisfactory agreement given the current market environment.

“We are no longer confident that we can satisfy our value creation and employee retention objectives — and I am unwilling to subject the HP organization to the continuing distraction of pursuing this acquisition any further,” Fiorina said in a statement. “We remain committed to aggressively growing our consulting capabilities, organically and possibly by acquisition, and are open to other business arrangements to achieve our goals.”

For the fourth quarter, net revenue reached $13.3 billion, compared with $11.4 billion in last year’s fourth quarter. Net revenue in the United States grew 13 percent to $6 billion and outside U.S. revenue rose 20 percent to $7.3 billion.

European revenue was $4.5 billion, up 15 percent; Asia Pacific, revenue reached $1.9 billion, up 36 percent; and revenue in Latin America rose to $0.6 billion, up 11 percent.

The company’s imaging and printing systems segment — laser and inkjet printing, and imaging devices and associated supplies — grew 6 percent in revenue year over year. Operating margin was 13.4 percent, up from 13.2 percent last year.

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