Hewlett-Packard Co. on Thursday reported third-quarter earnings it described as “unacceptable” and cut its forecast, triggering the biggest share decline in almost three years.
The Palo Alto, Calif.-based company said net income rose to $586 million, or 19 cents a share, from $197 million, or 10 cents a share, a year earlier. But excluding some items, its profit of 24 cents a share fell 7 cents a share short of estimates.
Chief Executive Carly Fiorina blamed “overly aggressive” price cuts, and fired three executives. She cited “missteps” by executives running sales of servers and computer storage systems to corporations.
Sales rose 8.9 percent, to $18.9 billion, but sales of servers and storage systems to businesses fell 5 percent, and that unit had an operating loss of $208 million.
Shares of Hewlett-Packard closed at $16.95, off $2.57, or 13 percent, after falling as much as 18 percent, leaving the stock below where it stood when the company completed its $18.9 billion purchase of Compaq Computer Corp. in May 2002.
The decline is the biggest since the stock tumbled 19 percent on Sept. 4, 2001, the day Hewlett-Packard proposed to buy Compaq.
“This was a big miss,” said Pierre Johnson, an analyst at John Hancock Advisors Inc. in Boston. “Every few quarters they tend to stumble. They’re a serial mis-executor.”
The drop echoed a plunge last August, when the company also announced profit that missed Wall Street estimates and blamed discounting.
“You have to be concerned about the leadership at Hewlett-Packard,” said Paul Cook, director of technology investing at Munder Capital Management in Farmington Hills, Mich. “Every quarter, it seems to be a different explanation for what went wrong.”
Among those fired was Peter Blackmore, the company’s head of business sales and the highest-ranking former Compaq executive at Hewlett-Packard.
Hewlett-Packard is under pressure from Dell Inc., which last year overtook Hewlett-Packard as the world’s largest personal computer-maker.
Dell kept the heat on Thursday by posting second-quarter net income of $799 million, or 31 cents a share, up 29 percent from a year ago, when it earned $621 million, or 24 cents a share.
Sales jumped 20 percent, to $11.7 billion, as the Round Rock, Texas-based company bolstered sales of servers and printers, and expanded outside the U.S.
Dell’s PC market share grew to 18 percent in the quarter, compared with Hewlett-Packard’s 16 percent, according to researcher IDC. Dell’s shipments surged 23 percent, beating the 15 percent increase by Hewlett-Packard.
“Dell has been taking share and driving profitable growth,” said Cook. “You look at Hewlett-Packard and ask why they can’t adopt similar strategies.”
Hewlett-Packard is the world’s largest maker of server and storage computers, with 29 percent of the market to Dell’s 21 percent.
But Dell has “a lower-cost business model, which means they can offer lower prices,” said Jason Maxwell of Los Angeles-based money manager TCW Group Inc. “It’s just a matter of time before they become No. 1.”
Dell’s report came out after the close of trading.
