Hewlett-Packard slumps premarket on large 3Q loss

NEW YORK -- Shares of Hewlett-Packard Co. skidded 4 percent in premarket trading Thursday after the world's largest maker of printers and PCs reported weak third-quarter results and took a huge charge to write down the value of a recent acquisition.

HP and its competitors are dealing with decreased sales of PCs as tablets and smartphones grow in popularity, so they are trying to expand their business into other areas. During the quarter HP wrote down the value of its Electric Data Systems unit by $8 billion and also took charges related to job cuts as it tries to slash its costs. The Palo Alto, Calif., company lost $8.9 billion in the fiscal quarter, and its revenue of $29.7 billion was about $500 million less than Wall Street expected.

The company suggested it may take another impairment charge in the current quarter, possibly in its software business. Analysts said the company's outlook was less than upbeat, as it expects PC sales to remain weak while the shaky economy in Europe and other regions continues to hurt its business.

"We expect the underlying macro and industry headwinds, which have recently intensified, will remain in (the fourth quarter) and well into fiscal year 2013," said President and CEO Meg Whitman. "This will pressure both our top line performance and our ability to reposition our portfolio and make the right investments."

Shares of HP lost 82 cents, or 4.3 percent, to $18.38 in premarket trading. The stock closed at $19.20 Wednesday. HP shares reached an annual low of $17.41 on Aug. 2, and traded as high as $30 in February.

HP reported its results after the market closed Wednesday. Dell Inc. posted weak quarterly results Tuesday. Dell's revenue was less than expected and the company forecast a larger miss in the current quarter relative to analyst expectations. Like HP, Dell said the slumping economy and weak consumer demand hurt its business and said many customers were holding off on buying new PCs until after Microsoft Corp. starts marketing Windows 8 in late October.

Jefferies & Co. analyst Peter Misek said revenue from HP's consumer business and notebook computer business both struggled. He added that the growing demand for smartphone and tablet sales is also hurting printer sales. Misek maintained a "Hold" rating on the stock and lowered his price target to $17 per share from $21.

Sterne Agee analyst Shaw Wu was more optimistic, saying the company had a "solid quarter" and eliminated about $3 billion in debt over the last three months. Wu maintained a "Buy" rating but trimmed his price target to $31 per share from $33.

"Concerns with its quality of earnings given the large amount of restructuring charges and negative tone on its conference call unfortunately overshadow the considerable improvement made in its balance sheet," he said.