H-P Chief Sees More Pain Ahead for Tech Industry

Breaking from other technology chiefs who have recently expressed optimism, Hewlett-Packard Co. Chief Executive Mark Hurd warned he hasn't seen the tech industry emerge from its painful slump.
##CONTINUE##
Mr. Hurd said in an interview that the spending climate "looks the same" in the current quarter as the preceding quarter, where H-P recorded a 17% profit drop amid sharp declines in sales of its PCs and printers. He later added in a conference call, "I'm not ready to call it better."

H-P said it will cut an additional 2% of its work force, or more than 6,000 jobs, over the next year as part of its integration of Electronic Data Systems, a technology-services company. The company is already cutting nearly 25,000 jobs because of the deal.

Mr. Hurd's remarks tempered the recent optimism generated by executives at other tech companies, including Cisco Systems Inc. and Intel Corp.

On Tuesday, H-P also posted a 3.2% revenue decline for its fiscal second quarter ended April 30. It was the first year-over-year decline in quarterly revenue for the Palo Alto, Calif., company since Mr. Hurd took over as CEO in 2005.

While H-P maintained its profit projections for the fiscal year, the company sounded a more cautious note on its revenue. H-P said revenue will likely decline 4% to 5% for the fiscal year, compared with a previous forecast for a 2% to 5% fall.

That sent H-P's shares down nearly 5% in after-hours trading to $34.89, after the company's stock closed at $36.58 on the New York Stock Exchange.

Until recently, H-P, the world's largest PC company by revenue, had steadily growing profit and revenue. But it stumbled at the end of last year as corporate tech spending plunged, even as it continued to outpace competitors like Dell Inc. in the PC business.

For the second quarter, H-P had a profit of $1.72 billion, or 70 cents a share, compared with $2.06 billion, or 80 cents a share, a year earlier. Revenue was $27.35 billion, compared with $28.26 billion a year ago.

Overall, the results were in line with Wall Street expectations. "We're pretty pleased with the results," said Bill Kreher, an analyst at Edward Jones, though he added that "we're not seeing clear signs of a pick up" in the tech market.

Revenue at H-P's PC division dropped 19% to $8.2 billion. Hit by declining PC prices, the unit's operating profit margin was 4.6%, down from 5.4% last year. In the imaging-and-printing unit, revenue slid 23% to $5.9 billion.

-----------------------------
BY JUSTIN SCHECK
Source：The Wall Street Journal

Write to Justin Scheck at justin.scheck@wsj.com

Copyright ©2009 Dow Jones & Company, Inc. All Rights Reserved.