OEM’s CEO warns of unexpected earnings slide in 2013, prompting shares to fall to nine-year low.
Reuters reports that HP shares fell 13 percent – the biggest single-day decline since August 2011 on Wednesday after Meg Whitman, CEO of HP warned at the company’s annual Securities Analyst Meeting that revenues are expected to fall in “every business division except software”, and that recovery would not become “visible” until 2014 when investments start to pay off.
According to the article, Wall Street had hoped to see quicker progress of HP’s turnaround plan, with analysts purportedly remarking that HP is “struggling to shore up its credibility on Wall Street” following the company’s “crumbling margins”, cuts in IT spending and staff restructuring, including cutting 29,000 jobs in the next two years.
Speaking at the meeting in San Francisco, Whitman reportedly blamed the slow turnaround on “unprecedented executive turnover in past years”, with the CEO stating that “The single biggest challenge facing Hewlett-Packard has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices, and frankly some significant executional miscues.”
However, Whitman added that “All this is fixable, but it is going to take some time.”
Shaw Wu, Analyst, Sterne Agee commented on the meeting: “I was surprised that nothing new was really said in terms of strategy, and the problem here is there is lack of investor confidence in the current strategy.”
HP’s enterprise services division is expected to suffer most, with an estimated fall of between 11 and 13 percent in fiscal 2013, despite the area reportedly being a “key component” of the company’s recovery plan.
Overall earnings of the company for 2013 are forecast to be between $3.40 and $3.60 per share – significantly below the Wall Street average of $4.18, with Mike Nefkens, HP’s acting global enterprise leader commenting that 2013 “will be a fix and build year” and that HP “expect[s] long-term growth to be back in the three to five percent range and long-term profit to be in the seven to nine percent range.”