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HP warns about 2Q results
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April 18, 2001: 11:14 a.m. ET
Computer maker says sales, profit drop due to consumer spending decline
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NEW YORK (CNNfn) - Hewlett-Packard Co. Wednesday became the latest casualty of the slowdown in technology spending by Corporate America, warning it will miss sales and earnings targets for the latest quarter and setting plans to cut 3,000 jobs, or about 3 percent of its work force.
The No. 2 U.S. computer manufacturer said it now expects to earn between 13 and 17 cents a share in its fiscal second quarter, which ends April 30. First Call's forecast for the company called for earnings per share of 35 cents in the period, which was already down from 44 cents in the year-ago quarter.
Palo Alto, Calif.-based Hewlett-Packard (HWP: up $3.55 to $32.80, Research, Estimates) also said it expects revenue to decline 2-to-4 percent from both last year's second quarter and the first quarter of the current year. HP posted sales of $12.0 billion in the year-ago quarter, and $11.9 billion in its fiscal first quarter. First Call's forecast had called for the company's revenue to rise to $12.2 billion in the current quarter.
 "We are ... looking at, at this point, flat revenue growth in the third quarter," CEO Carly Fiorina said in a conference call with analysts Wednesday.
Fiorina added that she anticipates flat revenue in the third quarter and for the year compared to year-earlier periods, and that margins will "trend up" in the third quarter.
However, the news had little effect on the markets, as a surprise interest rate cut by the Federal Reserve sent stocks soaring. Positive earnings from General Motors (GM: up $3.55 to $57.18, Research, Estimates) and Intel also contributed. (INTC: up $4.87 to $30.91, Research, Estimates). At 11:47 a.m. ET, the Nasdaq composite index jumped 162.32 points, or more than 8 percent, to 2,085.54, while the Dow Jones industrial average rose 413.03, or 4 percent, to 10,629.76.
"I don't think this is a total shock, given what their competitors have done," Bear Stearns analyst Andrew Neff told Reuters news service Wednesday.
The company said it will not extend a 90-day salary freeze, but it will control costs by eliminating 3,000 management positions and requiring other employees to take days off. HP employs 88,500 people worldwide.
The company anticipates a $150 million one-time inventory and capacity write-down associated with some of its consumer products, as sales have plummeted both in the United States and overseas.
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"When we issued our previous second fiscal quarter guidance, we had limited visibility into the extent of the U.S. consumer and commercial downturn, its potential impact on other regions and the continuation of adverse currency effects," Fiorina said in a statement. "At this time, it is quite clear that the U.S. downturn in the consumer market is now spreading to other regions, notably Europe."
On Feb. 15, HP warned it might not hit fiscal year earnings targets because of the slowdown in consumer spending on computer products even though the company met lowered first quarter estimates.
Fiorina had said then that the company was still maintaining its second-quarter revenue and earnings projections despite the slowdown. 
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