Hewlett-Packard Cuts Outlook For Year Following Leaked Memo

PALO ALTO (CBS/AP) -- After a leaked memo from the CEO Leo Apotheker warned of a rough path ahead, Hewlett-Packard Co. cut its full-year outlook Tuesday, citing a trifecta of woes that include the earthquake in Japan, soft PC sales and weakening performance in its crucial tech services business.

A higher net income for the quarter was overshadowed by what lies ahead for the world's No. 1 PC maker, and company shares fell more than 5 percent before the market opened.

Palo Alto-based HP reported earnings of $2.3 billion, or $1.05 per share, for the three months that ended April 30. That's up from $2.2 billion, or 91 cents per share, in the same time last year.

Excluding special items, HP earned $1.24 per share in the fiscal second quarter, ahead of the $1.21 per share that analysts polled by FactSet were expecting.

Revenue climbed 3 percent to $31.63 billion, slightly above Wall Street expectations of $31.55 billion.

Yet HP now expects earnings of $5 per share for the year, short of its earlier predictions of between $5.20 to $5.28 per share, and below Wall Street expectations of $5.24.

The company also lowered its 2011 revenue guidance range slightly, to between $129 billion and $130 billion. In February it had forecast revenue of $130 billion to $131.5 billion. Analysts are predicting $130.47 billion.

The company's outlook for the current quarter also left investors wanting.

HP is forecasting adjusted earnings of $1.08 per share and revenue between $31.1 billion and $31.3 billion. Wall Street was looking for adjusted earnings of $1.23 cents per share and $31.84 billion in revenue.

The company reported its quarterly results a day early after a leaked memo from Apotheker warned that the company was bracing for "another tough quarter" in the May-July period, and that management needed to "watch every penny and minimize all hiring."

HP is wrestling with poor demand from consumers even as business spending has begun to recover.

In addition to the earthquake and weak consumer PC sales, HP warned of falling operating profits from technical services, one of its most important businesses. This segment faces growing competition from smaller companies offering technology outsourcing and other services.

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