HP shares drop 12% on disappointing quarter
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Honeymoon period over for CEO Leo Apotheker as first full quarter at helm fails to meet Wall Street expectations
Hewlett-Packard grew revenues 3.2% to $32.2 billion in its latest financial quarter, but the IT giant's share price tumbled 12% after undershooting Wall Street expectations of $33 billion.
"Despite strong profitability and cash flow in the quarter, we did not meet our top-line growth expectations," CEO Leo Apotheker told financial analysts in a conference call following the results. HP has also lowered its overall guidance for the full year by $2 billion.
In its first quarter of the year, which closed 31 January 2011, the IT giant's net income rose 15.8% to $2.61 billion.
HP Enterprise Services turned in a weak performance, declining 2% year-on-year to $8.6 billion, flouting the company's own hopes. "We assumed that we would increase long-term signings," Apotheker conceded.
The company's PC business was another revenue drag – sales fell 1% to $10.45 billion. Apotheker blamed this on "soft" demand in the consumer market.
One area where the world's largest IT business did see strong growth however was its servers, storage and networking unit, where sales jumped 22%.
Former SAP chief Apotheker took the helm at HP on 1 November 2010. He replaced Mark Hurd, who was ousted from the role last August after an internal probe into 'questionable' expense claims. Hurd later joined software vendor Oracle as president.
Prior to this latest results announcement, Apotheker had enjoyed something of a honeymoon period in his new job. Since arriving, Apotheker has distanced himself from the cost-cutting measures associated with predecessor Hurd, reinstating pay rises and bonuses for HP staff. He has also claimed to have met "thousands" of the company's employees, and committed more resources to research and development.
Apotheker has also fleshed out HP's all-important mobility strategy. In February, the vendor announced a new line of smartphones and tablet computers based on the handset vendor Palm's WebOs platform. HP acquired Palm for $1.2 billion last April.
