HP warns of widening slowdown in IT spending

Hewlett-Packard Co. warned Wednesday that it’s becoming “more cautious” about the revenue outlook during its current fiscal quarter, saying a slowdown in IT spending appears to be spreading to other parts of the world beyond the United States and Europe.

Carly Fiorina, HP’s chairman, president and CEO, said during a meeting with financial analysts this morning that the company now plans to implement additional cost-cutting moves in an attempt “to increase the probability of achieving” its expected profit level for the three-month period ending July 31.

Purchases by corporate users and consumers were soft last month in all geographic regions, HP disclosed. As a result, the company said, Fiorina and other executives are taking an increasingly cautious view of projections calling for revenue during the fiscal third quarter to range from being flat with the second-quarter level of US$11.6 billion to falling as much as five per cent.

“While it is still early in the quarter, May was softer than expected, and we are now addressing what is clearly becoming a global [IT spending] slowdown,” Fiorina said Wednesday. “We are taking additional steps to generate revenues and reduce costs, while continuing to implement our long-term growth strategy.”

This will be the fourth straight quarter in which HP reports weak financial results, and Fiorina said the “increasingly tough environment … could last for some time.” However, company officials “remain convinced that HP is on the right track” strategically, she added.

HP last month reported a 60 per cent year-to-year decline in pro forma operating profits for its fiscal second quarter, with revenue dropping four per cent. In addition to the spending slowdown by users, the company is also wrestling with a series of internal sales and marketing issues that Fiorina has said are particularly affecting its enterprise operations.

Fiorina didn’t disclose specific details about the new cost-reduction actions that are on the way. HP has already made two rounds of job cuts this year, most recently announcing two months ago that it planned to eliminate up to 3,000 management jobs in a move that would lower its workforce by about three per cent.

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Jim Love, Chief Content Officer, IT World Canada

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