May 17, 2011, 11:42 AM — Shares of Hewlett-Packard (NASDAQ: HPQ) plunged more than 9 percent in early trading Tuesday after the company inadvertently issued a warning for "another tough quarter" in the form of a leaked memo from chief executive Leo Apotheker.
HP was expected to announce second-quarter results after Wednesday's trading bell, but moved up the release following the publication Monday of Apotheker's memo.
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In a conference call Tuesday morning, HP warned that results for its third quarter would not meet previous estimates and also reduced its forecast for the fiscal year.
By late Tuesday morning, HP shares were down 3.45, or 8.7 percent, to 36.35 after falling as low as 36.17.
The Wall Street Journal reports:
The Palo Alto, Calif., company's disappointing outlook follows a leaked memo from Chief Executive Leo Apotheker in which he asked his lieutenants to cut back expenses and cautioned that the world's largest technology company by revenue is in for "another tough quarter." Following the memo, H-P moved up its earnings report by a day.
During Tuesday's earnings call, HP cited a steady decline in consumer PC purchases, the effects of March earthquake and tsunami that devastated Japan and lower margins for the company's services business.
HP's second-quarter results actually slightly topped expectations. Net income was $2.3 billion, or $1.05 a share, up 15 percent from last year's profit of $2.2 billion, or 91 cents a share. On an adjusted (non-GAAP diluted) basis, HP's profit in Q2 was $2.7 billion, or $1.24 a share, on revenue of $31.63 billion.
Consensus forecasts called for earnings of $1.21 a share on sales of $31.5 billion.
But Wall Street's focus was squarely on the gloomy forecast, fueled by Apotheker's memo, which the WSJ said was sent to 10 HP executives:
"We must watch every penny and minimize all hiring," Mr. Apotheker wrote in the email, a copy of which was reviewed by The Wall Street Journal. "We have absolutely no room for profitless revenue or any discretionary expenditures."
Sounds like the internal honeymoon (if there was one) is over for Apotheker, who assumed the top spot last fall following the departure of former CEO Mark Hurd.
HP forecast fiscal Q3 earnings of $1.08 a share and revenue of $31.1 billion to $31.3 billion, below previous Wall Street estimates of $1.23 in net income and $31.8 billion.
If HP is suffering from a slowdown in PC sales, there's a great likelihood that Dell's quarterly earnings report due later Tuesday will include some unpleasant news for investors. We'll know soon enough -- and maybe sooner, if someone leaks a memo.