Hewlett-Packard Co, the world's largest personal-computer maker, reduced sales estimates for the second half in its first forecast since buying Compaq Computer Corp, blaming lower demand.
Acquisition costs related to Compaq will be US$2.6 billion, or 86 percent more than forecast, because of higher severance expense and US$500 million to write off goodwill, said Jeff Clarke, co-leader of the integration team. Hewlett-Packard also said it will save more than forecast on the deal in the next two fiscal years.
Second-half sales will be stagnant at US$35 billion to US$36 billion because of less demand for PCs, Chief Financial Officer Bob Wayman said at a meeting with analysts in Boston. They had been expected to rise as much as 3 percent, to US$37.1 billion, Chief Executive Carly Fiorina said. Investors said they don't expect demand to rebound soon.
"What they're recognizing is that the economy didn't turn around as fast as many had hoped," said Bruce Raabe, chief investment officer at Collins & Co, which manages US$500 million that includes 190,000 Hewlett-Packard shares.
Sales in the third quarter ending in July are forecast to drop as much as 7 percent, to US$16.2 billion, because of the decline in PC sales, Wayman said. Analysts expected sales of US$17.7 billion, the average estimate in a Thomson First Call survey. The company had forecast a rise of 2 percent to 3 percent, Fiorina said.
"Corporate IT spending has just evaporated," Raabe said.
"We're seeing some signs of strength in the economy, but we haven't seen much IT spending. We haven't seen corporations ramp up equipment spending."
Fiscal 2003 sales will grow 4 percent to 6 percent, or as much as US$78.9 billion, the company said in its first forecast for the year beginning in November. Sales will rise 7 percent to 9 percent in fiscal 2004, or as much as US$86 billion, Hewlett-Packard said.
The company had estimated that sales would increase 8 percent to 10 percent in fiscal 2004, Fiorina told analysts.
"Now is not the time to set the bar too high," Fiorina said. "Now is the time to set the bar that we can meet or beat."
The company was expected to have sales of US$70.8 billion in fiscal 2003 and US$80.2 billion in 2004, the average estimates from analysts surveyed by IBES International Inc.
The company was forecast to have sales of US$74.8 billion this year, according to a Thomson First Call analyst survey.
"The fact that they moved the revenue number for 2004 down a notch or two, that's not a big surprise -- this is a best guess at this time," Raabe said.
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