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HP to miss 2Q target
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May 13, 1998: 8:23 p.m. ET
Company says pricing pressures, Asia crisis caused the earnings shortfall
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NEW YORK (CNNfn) - Hewlett-Packard Co. late Wednesday warned its second-quarter earnings will fall well below analysts' expectations due to pricing pressures in the personal computer market and troubles in Asia.
The company said it expects profits for the three months ended in April to fall to approximately 65 cents a share from 75 cents a year ago.
Wall Street had expected HP to report a profit of 77 cents a share in the quarter, according to First Call.
News of the shortfall, which was released after the New York markets had closed, sent HP shares tumbling in after hours trade. Shares of HP (HWP) closed in New York at 81-5/8, up 1-3/4. But in after hours trade they tumbled 7-5/8.
"While we did achieve good revenue and order growth this quarter, we are disappointed that our early calculations show earnings per share coming in well short of expectations," said Lewis E. Platt, HP chairman, president and chief executive officer.
HP said its earnings suffered because of its product mix and pricing pressures in the PC business.
The company also said economic weakness in Asia affected a number of its businesses, particularly measurement systems. HP said those products typically have higher gross margins.
Steve Pavlovich, HP's director of investor relations, said PC sales were the "biggest problem by far" due to pricing pressures and deteriorating results in April.
"Unfortunately, the price cuts we had to initiate to keep up with our competitors' fire sales took a toll," he said.
The company noted that its expected earnings to include charges associated with printer-manufacturing consolidations in North America and $25 million in research and development costs relating to its acquisition of Heartstream Inc.
"We just had too many things go wrong in April," Pavlovich said.
HP will formally announce its second-quarter earnings Friday before the stock market opens. It originally planned to make the announcement next Monday.
Analysts said Asia and the PC price war were well known factors in the market, but HP's warning was worse than expected.
"It's not that Asia and PC's aren't something we didn't already know about but this is clearly worse than we expected," said Philip Rueppel with BT Alex Brown. 
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Hewlett-Packard
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