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Hewlett Packard shares plummet on weak forecast

Last updated: 13:31 23 Feb 2011 GMT, First published: 14:31 23 Feb 2011 GMT

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Hewlett Packard (HP) (NYSE:HPQ) fell roughly 10% on Wednesday after the company disappointed investors with its outlook for the year, missing estimates due in large part to a consumer slump.


For the second quarter of fiscal 2011, the company projected adjusted earnings per share as high as $1.21, on revenues up to $31.6 billion. These predictions fell below analyst expectations of $1.26 earnings per share on sales of $32.6 billion.


The Palo Alto-based computer maker was down nearly 9% at $44.00 twenty minutes before market open on Wednesday.


For the full year 2011, HP cuts its sales outlook to up to $131.5 billion, again falling below the $133.1 billion analysts anticipated. Excluding one-time costs, earnings for the year are expected to fall between $5.20 to $5.28 per share - in line with estimates.


For the first quarter ending January 31, 2011, HP posted net earnings of $2.61 billion, or $1.17 per diluted share, compared to $2.25 billion in profits, or $0.93 per share, in the year ago period.


Adjusted to exclude some after-tax costs, earnings were $1.36 per share - a 27% year-over-year increase. 


Revenues climbed marginally to $32.3 billion, versus $31.18 billion in the first quarter of fiscal 2010. Analysts were projecting earnings of $1.29 per share on revenues of $33 billion.


For the first quarter, personal systems group revenue declined 1% year-over-year to $10.45 billion on a 12% decline in sales from consumer clients, partially offset by an 11% rise in sales from corporate customers. Services revenue suffered too, falling 2% to $8.61 billion from a year earlier.


In an attempt to mitigate the impact of sluggish consumer demand, HP is building up its cloud services - a way to access applications and store information through the Web. The Enterprise Servers, Storage and Networking division's revenue grew 22% in the first quarter to $5.63 billion.


"HP has a powerful portfolio, including exciting, recently announced cloud and connectivity offerings. We are focused on leveraging these strengths to extend our leadership and accelerate growth," said president and CEO Léo Apotheker. 


Sales from outside the US accounted for 65% of total HP revenue in the first quarter, with sales from the BRIC countries (Brazil, Russia, India and China) increasing 11% year-over-year.

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