Hewlett-Packard Plummets Following Forecast for Profit

Hewlett-Packard Co. was down in early trading in the U.S. after it forecasted quarterly as well as full year profit that missed estimates by analysts saying the strong U.S. dollar would hurt its results as the maker of computers is preparing to split into two.

Shares of HP fell by as much as 7.8% prior to the markets opening after HP said profit prior to special items during its second quarter ending during April would be between 84 cents and 88 cents, while analysts had projected them to reach 95 cents. For its 2015 fiscal year, profit would be between $3.53 and $3.73 per share, which was short of analysts’ estimates of $3.95 per share.

HP sees two thirds of its sales overseas and the impact from the strong dollar with currency exchange would be felt more than was anticipated last year when the original forecast was released.

Meanwhile, the increase in services via the Internet, more commonly known as cloud computing has chipped away at its sales and earnings from the traditional storage hardware and equipment.

The company, based in Palo Alto, California is breaking in two to become more responsive to its corporate customers and said it would be incurring close to $2 billion in costs for a period of two years related to its split.

In premarket trading HP was down 6.7%. Thus far, in 2015, the stock had dropped by 4.1%, while the S&P 500 as a whole has increased by 2.8%.

The dollar has increased by 21% against the euro over the last 12 months, in doing so it has eroded value of revenue in U.S. companies that is generated overseas when it is returned to the U.S.

Hewlett-Packard in 2014 had 65% of its sales from overseas. For its fiscal year first quarter, which ended on January 31, profit prior to special items was 92 cents per share, in comparison to estimates of 91 cents. Net income was $1.37 billion equal to 73 cents per share, compared to $1.42 billion equal to 74 cents per share one year ago.

 

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