Hewlett-Packard (HPQ) is the latest old-tech company to bomb its first sales report of 2015. This marks the second quarter in a row in which HP’s revenue came up at least $400 million shy of expectations.
Shares of HP are down 10% today on slipping revenue and a downgraded outlook for the remainder of the year. Other members of the old tech vanguard including Microsoft and Intel are also off to a rough start in 2015. Their stock prices have declined 6% each since the start of the year.
Unexpected strength in HP’s PC business kept the company afloat last year. This quarter sales in nearly all of HP’s core businesses fell, dragging net revenue 5% lower. Contributing analysts on Estimize has expected sales of $27.490 billion, just a 2% dip. Technically speaking the company managed to pull off a minor EPS beat, but make no mistake this was a bad quarter.
Of all HP’s major segments Enterprise Services showed the poorest results. There sales dropped from $5.595 billion in the same quarter of last year to $4.993 billion, a 10.8% decline.
CEO Meg Whitman was quick to point the finger at currency headwinds. HP does some 65% of its business overseas, which means the strong US dollar is causing serious harm to the company’s bottom line.
Investors with a longer term view may be comforted to hear that Whitman isn’t going to allow currency headwinds to curb her investment in the company’s future. Rather than bring down spending to boost earnings, management cut its full year earnings guidance by 30 cents per share.
Less than a year ago high growth tech stocks were melting down. Market commentators were pounding the table on the overvaluation of small tech and predicting an impending resurgence of old tech names. Suddenly international exposure has become a drag on earnings. It’s amazing how quickly foreign exchange headwinds have blown conditions back in small tech’s favor.
Comments
Log in or sign up to join the conversation.