Earnings Reports for Nov. 13

— -- Hewlett-Packard Misses Estimates

Tech heavyweightHewlett-Packard stunned Wall Street by reporting a big earnings shortfall before the market opened today and saidit ended talks to buy the consulting business ofPricewaterhouseCoopers.

The stock of the computer and printer maker fell more than12 percent, weighing down markets in general following lastweek’s rout, which was spurred by a revenue warning frompersonal computer maker Dell Computer.

HP shares slumped $5 to $34-1/8, a low unseen since April1999, helping to pull down the Dow Jones industrial average,which was off about 167 points inafternoon trading.

The Palo Alto, Calif.-based company reported fourth-quarterearnings far short of Wall Street expectations, citing marginpressures, adverse currency effects, higher-than-expectedexpenses, and business mix.

Hewlett-Packard Chairman, President and Chief ExecutiveOfficer Carly Fiorina said she was “very disappointed that wemissed our [earnings per share] growth target this quarter dueto the confluence of a number of issues that we now understandand are urgently addressing. I accept full responsibility forthe shortfall.”

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

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

Hewlett-Packard reported fiscal fourth-quarter earnings pershare of 41 cents, excluding investment and divestiture gainsand losses, the effects of stock appreciation rights andbalance sheet translation, and restructuring expenses. Analystshad been expecting 51 cents per share, according to researchfirm First Call/Thomson Financial.

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

In regard to the planned $18 billion acquisition ofPricewaterhouseCoopers’ service arm, Hewlett-Packard said thetwo companies were unable to reach a satisfactory agreementgiven the current market environment.

“We are no longer confident that we can satisfy our valuecreation and employee retention objectives — and I amunwilling to subject the HP organization to the continuingdistraction of pursuing this acquisition any further,” Fiorinasaid in a statement. “We remain committed to aggressivelygrowing our consulting capabilities, organically and possiblyby acquisition, and are open to other business arrangements toachieve our goals.”

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

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

The company’s imaging and printing systems segment — laserand inkjet printing, and imaging devices and associatedsupplies — grew 6 percent in revenue year over year. Operatingmargin was 13.4 percent, up from 13.2 percent last year.

Revenue in the computing systems segment — which includesworkstations, desktops, notebooks, mobile devices — grew 29percent in compared with last year. Operating margin was 3.7percent, up from 3.2 percent last year, but down 7.3 percent inthe third quarter.

Information technology services — hardware and softwareservices, along with outsourcing, consulting and customerfinancing services — grew 15 percent in terms of revenuecompared to the same period last year, while operating marginwas 7.4 percent, essentially flat with 7.5 percent last year.

For the 2001 fiscal year ending Oct. 31, 2001,Hewlett-Packard said it expects revenue to grow by 15 percentto 17 percent compared with the 15 in the fiscal year 2000 itjust completed.

The company said it expects gross margin percentage infiscal 2001 in the range of 27.5 to 28.5, compared to 28.5percent in fiscal 2000, with improvements beginning in thesecond quarter. Total operating expenses in fiscal 2001 areexpected to be between 10 percent to 12 percent above fiscal2000. The company also said it expects its tax rate is expectedto remain constant at about 23 percent.BACK TO TOP