Wed, May 18, 2011 - Page 10 News List

Leaked memo shows new HP boss displaying jitters


A leaked memo from Hewlett-Packard Co CEO Leo Apotheker warning of “another tough quarter” underscores the urgent concerns about the technology heavyweight’s growth strategy and the challenges facing its new leader.

Reports of the May 4 missive from Apotheker to his top executives surfaced late on Monday, sending HP shares tumbling. HP abruptly moved up its earnings report to yesterday morning. It had originally been scheduled to be released this afternoon.

The jitters reflect investors’ anxiety about what is essentially a classic big-company problem — with a twist.

HP is struggling to find ways to meaningfully boost sales without chasing bottom-feeder deals that eat away at profits. It’s a code that many analysts believe HP hasn’t cracked.

This came as the 72-year-old company is recovering from the trauma of the management scandal that brought about the sacking of Apotheker’s predecessor, Mark Hurd, in August, and led to the -replacement of one third of HP’s board. The boardroom purging was unusually severe for a company HP’s size and the turmoil reinforced a perception among many technology watchers of dysfunction in the top ranks of a Silicon Valley institution.

Hurd’s exit may have come at the right time. Apotheker inherited Palo Alto-based HP seven months ago, as pressure mounted against the company from many fronts.

Wall Street has been unforgiving.

HP’s stock had already fallen nearly 20 percent since the last earnings announcement in February, in which the company disclosed falling revenue from personal computers and services — two of its most important businesses.

The falling sales led to lower-than-expected guidance. HP predicted US$130 billion to US$131.5 billion in revenue for the year. Analysts were expecting nearly US$1.5 billion more at the top end. The company’s shares sank, lopping some US$17 billion off HP’s market value.

In a news release that went out late on Monday, HP did not provide a reason for issuing its earnings report a day ahead of schedule. However, the announcement came just hours after reports surfaced that Apotheker warned his executives in a May 4 memo that HP was bracing for “another tough quarter” in the May-July period, and that management needed to “watch every penny and minimize all hiring.”

An HP spokeswoman declined to comment.

HP shares fell US$1.80, or 4.5 percent, to US$38 in extended trading.

HP, known for its printers and personal computers, is now a player in computer networking and technical services, deepening existing rifts with old foes while creating new ones with old allies.

In addition, the PC market — HP is the world’s No. 1 PC maker — is struggling from weakened consumer demand and is generally a thinly profitable business to begin with. The old guard of the services business are also facing tougher competition from smaller companies, and a picture emerges of a company under pressure from many fronts at once.

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