Hewlett Packard shares slump after price cuts

SHARES of Hewlett-Packard Co, the world’s second-biggest computer maker, fell as much as 12% after the company said it missed analysts’ third-quarter sales and profit estimates and cut personal computer prices too much.

Hewlett-Packard’s PC division, which had a loss after two profitable quarters, was “overly aggressive” in reducing prices to compete with Dell, said chief executive Carly Fiorina. The business-computer unit also had a loss, the fifth straight since Palo Alto, California-based Hewlett-Packard acquired Compaq Computer Corp last year.

Fiorina said last year the $18.9 billion Compaq deal would boost sales of server computers and services to companies. The third quarter ended July 31 had comparable results with Compaq in the year-ago period for the first time and shows the company relied on cost cuts and printers for profit, investors said.

“You get to a certain point and you’ve got to execute,” said Pat Becker Jr, who helps manage $1.5 billion at Becker Capital Management, which owned 890,723 Hewlett-Packard shares as of June. “They need to execute on the top line, and there’s only so much cost you can take out of the model.”

The Nasdaq Computer Index and Hewlett-Packard shares had risen more than 25% this year as investors bet on a rebound in spending on computers, software and related services.

Hewlett-Packard’s profit shortfall came one week after Dell chief Michael Dell dashed hopes that a big bang’ rebound in PC shipments and corporate spending is occurring.

Shares of Hewlett-Packard, which said profit and sales this quarter may also miss estimates and announced 1,300 additional job cuts, dropped $2.24 to $19.87 at 10:15am in New York Stock Exchange composite trading. They fell as low as $19.50. Computer- related companies including Microsoft Corp, Intel Corp, Dell and International Business Machines Corp also declined.

“The third quarter is always tough, but we still should have done better,” said Fiorina.

Excluding some costs, profit in the third quarter ended July 31 would have been 23 cents a share, three cents below the average forecast of analysts in a Thomson Financial survey.

Sales rose 4.9% to $17.3 billion from $16.5 billion. Analysts expected $17.5 billion. Sales may have declined were it not for the falling value of the US dollar, said the company.