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HP issues warning
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October 1, 1999: 2:27 p.m. ET
CEO says 4Q sales will come in at low end of range; Taiwan hurts supply chain
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NEW YORK (CNNfn) - Hewlett-Packard Co. warned Wall Street Friday that its fourth-quarter sales growth will come in at the low end of the forecast range because of shipment delays in the wake of the earthquake in Taiwan.
Carly Fiorina, HP's newly appointed chief executive officer, told financial analysts the company had a "decent shot" at meeting fourth-quarter earnings estimates, but saw sales growth at the low end of the expected 10-to-13-percent range.
Her comments sent shares of Hewlett-Packard (HWP) tumbling 3-5/8 to 87-1/8 in afternoon trade.
Analysts polled by forecast-tracking firm First Call had expected the firm to earn 99 cents a share in the quarter.
Fiorina said several units remained strong, particularly the PC and printer businesses, but the recent earthquake in Taiwan has increased the likelihood of some delays in its PC supply chain.
"With the Taiwan disruption, which affects, most especially, our PC business, we don't think we'll achieve the high end of [the sales] range and are more likely to come in closer to the low end," Fiorina said.
Analysts, however, shrugged off Fiorina's comments. Stephen Dube, an analyst at an analyst at Wasserstein Perella Securities, said the market over-reacted in selling off HP shares, especially considering the company is still on track to meet fourth-quarter earnings estimates.
"Sales will be a little lower, but that will be offset by other factors," he said. "Their PC business is doing better than expected with better margins, and their printer business is doing better than expected."
Dube also noted that investors should not have been taken by surprise by the fact that several technology sectors are expected to experience a short-term impact from the Taiwan earthquake.
"Anyone who hadn't assumed companies wouldn't have a short-term impact because of Taiwan had their head in the sand," Dube said. "By short term, I'm talking about a couple of weeks. This will not affect the outlook for anyone next year."
Too early to tell?
Other analysts are working to allay investor fears over the Taiwan situation. Mona Eraiba of Gruntal said the motherboard supply out of Taiwan appears to be back on track and that it's early enough in the fourth quarter to recover.
Some industry experts, however, believe it's still too early to determine what long-term effects of the Taiwan earthquake will have on the tech sector. Taiwan produces two-thirds of the world's integrated computer chips, particularly D-RAM -- or memory -- chips.
Danny Lam, director of Fisher-Holstein Inc., a semiconductor research firm, said credible damage reports won't come out of the region until this weekend at the earliest.
"Until then, we're dealing with smoke and mirrors," Lam said. "We're looking at an industry decline in capacity of 20 percent [in October]. What you've got right now is propaganda from companies saying that everything is okay."
HP wasn't the only company under pressure Friday because of the Taiwan earthquake. Dell Computer Corp. (DELL) found its shares were unchanged at 41-13/16 after BancBoston Robertson Stephens downgraded its stock to "long-term attractive" from "buy." Its shares had fallen as low as 39-3/4 earlier in the session.
BancBoston analyst Dan Niles said Dell will experience slower-than-expected revenue growth in part because of the Taiwan earthquake.
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Hewlett-Packard
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