Ahead of the Bell: HP shares slip after 4Q results

AP News
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Posted: Nov 24, 2009 8:39 AM

Hewlett-Packard Co. shares slipped Tuesday after the computer and printer company's fourth-quarter results showed weakness in its core businesses and that growth in PC shipments were accomplished at lower prices.

Deutsche Bank analyst Chris Whitmore said without the boost from technology services, revenue would have fallen by 13 percent from a year ago, excluding the effects of foreign currency fluctuations.

While he raised his revenue and earnings estimates for HP, as well as his price target, Whitmore kept his "Hold" rating because of downward pressure in HP's printing business.

He said printer revenue in the quarter came in softer than expected and that he sees HP stepping up efforts to regain market share. Such actions usually include larger discounts.

Sales in China were a bright spot in the quarter, up 20 percent year-over-year, but Whitmore said margins were down indicating that HP sold more PCs but of the cheaper variety.

Windows 7 did provide a boost to sales, however, the analyst said in a research note.

Whitmore raised his fiscal 2010 revenue forecast to $119.4 billion from $116.7 billion, and earnings to $4.35 per share from $4.20. He also increased his price target to $52 from $44.

Late Monday, HP said it earned $2.4 billion, or 99 cents per share, compared with $2.1 billion, or 84 cents, in the same period a year ago. Revenue fell 8 percent to $30.8 billion, or down 5 percent on a constant currency basis. Both exceeded analysts expectations.

Shares of the Palo Alto, Calif. company fell 40 cents to $50.62 in premarket trading.