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HP issues earnings warning
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July 21, 1998: 8:08 p.m. ET
Computer maker blames int'l pressures for drop in sales, expects lower 3Q
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NEW YORK (CNNfn) - Blaming economic pressure in Asia and other regions, Hewlett-Packard Co. Tuesday told shareholders that third quarter earnings will likely fall below analysts' estimates.
The Palo Alto, Calif.-based computer and communications company said despite its successful cost-cutting efforts, earnings for the quarter ending July 31 are expected to come in below or flat with last year's results of 58 cents per share.
"Asia continues to be really week. We're hoping that we've reached bottom, but it's hard to say," said Steve Pavlovich, HP's manager of investor relations.
Pavlovich said business in the United States was weak in May and June, but started to show a pick up in recent weeks. Europe had a strong May, weak June and "so far a pretty good July."
Analysts polled by First Call had expected the company to earn 63 cents a share for the period. Results will be posted Aug. 17.
"With two months' results in, it appears that our third-quarter performance won't match analysts' expectations," said HP Chairman Lewis Platt. "We've done a much better job of managing expenses this quarter. But expense management can't compensate fully for struggling economies in Asia-Pacific and new signs of economic uncertainty elsewhere."
Hewlett-Packard, a Dow component, said the struggling Asia-Pacific market has taken its toll on the sale or communications and semiconductor-test equipment.
"We can't control economic environments," Platt said. "But we are doing everything possible to stay close to our customers, drive down expense growth and continue to create the kinds of products and solutions that will benefit our customers and shareholders for the long term."
Tuesday's warning was the latest in a series of misses for the computer giant, whose results have suffered most of the year from the weak economies of Asia, aggressive price cutting and trouble keeping a lid on expenses.
Those factors combined to keep the company's second-quarter income well below forecasts and caused it to implement shorter work weeks in some segments, temporary pay cuts for some managers and other cost controls.
HP said it has substantially moderated its expense growth, but improvement in expenses will not offset the impact of slower revenue growth on net earnings.
Separately, HP said it increased by $1 billion the authorization for its stock buyback program. It also announced new approval for a $2 billion repurchase of HP common stock.
HP's stock (HWP) rose 3-1/6 to 61-13/16 on the New York Stock Exchange. In after-hours trading, HP fell to 58.
--Reuters contributed to this report
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Hewlett Packard
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