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HP shares slip after quarterly profit falls short

3:48 PM, Aug 21, 2013   |    comments
Sign marks Hewlett-Packard's headquarters in Palo Alto, Calif. (Photo: Paul Sakuma, AP)
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SAN FRANCISCO (USA TODAY) -- Tech bellwether Hewlett Packard continued its long comeback Wednesday with financial results that fell short of expectations.

HP shares slid 2% to $25.00 in after-hours trading. The company announced its results after markets closed.

The company's third-quarter results announced Wednesday - earnings and revenue were down from the same quarter a year ago - come amid several darkening clouds on the computing front. The slumping PC business represents about 30% of HP's revenue and 10% of its profits.

HP said it earned an adjusted 86 cents per share on revenue of $27.2 billion. In the same quarter a year ago, HP reported a profit of $1 a share on revenue of $29.7 billion.

Analysts polled by Thomson Reuters expect HP to post profits of 86 cents a share on a non-GAAP basis for its fiscal third quarter on revenue of $27.29 billion, which would reflect a year-over-year decline of 14% and 8%, respectively.

Those same analysts, however, see progress on the horizon. Of 31 polled by Thomson Reuters, only 6 recommend selling the stock.

It was the fifth consecutive quarter of sales and profit declines from the Silicon Valley-based tech giant -- two years into Whitman's reign. Yet HP shares are up 80% this year because investors believe the worst is behind.

The results underscore general softness in the tech industry after a six-year boom ignited by the iPhone's introduction in 2007. Last week, computer-networking giant Cisco Systems said it plans to slash 4,000 jobs. Venture capital has slipped 7% this year.

Tech shares have tumbled amid slackening growth in key earnings' reports. Though the S&P 500 is up about 20% as of mid-August, tech stocks in the index were up only 11% -- one of the lowest-performing categories.

HP CEO Meg Whitman stressed her five-year reclamation plan isn't expected to show its first fruits until next year. She believes it can bounce back by building more PCs with touch-control screens, selling more tablets and expanding its product lines in business software, data analysis and storage, and technology consulting.

HP has been steadily rebuilding since a year ago, when it announced a $9.2 billion write-down on its acquisition of EDS and it wrote off $8.8 billion of the $11 billion it spent on British software firm Autonomy. HP is also in the process of shaving 29,000 jobs.

Still, she has her work cut out.

HP is smack dab in the middle of a major downshift in PC sales, as it reorganizes and sheds 29,000 jobs. And the company is expected to announce its fifth straight quarterly decline in earnings and sales today.

HP is counterbalancing declines in PCs and printers with products such as its Project Moonshot low-power servers and new storage offerings.

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