Hewlett-Packard tried to give the technology sector a shot in the arm Thursday when it reaffirmed its sales and earnings estimates for the first quarter. The problem is those estimates didn't impress investors in the first place.
Hewlett-Packard (NYSE: HWP) shares were off $3.63, or 10 percent, to $30.94 shortly after the announcement.
The stock fell to a 52-week low of $32.63 earlier this month following its disappointing fourth-quarter earnings report.
HP missed analysts' estimates by 10 cents a share when it posted a profit of 41 cents a share on sales of $13.3 billion.
On Thursday, HP reiterated that it would post sales growth of between 15 percent to 17 percent from the year-ago period with gross profit margins likely to fall between 27.5 percent to 28.5 percent.
It also said it's comfortable with the current First Call Corp. consensus estimate of 44 cents a share in the first quarter.
"Unlike some of our competitors, HP is far more than a U.S.-centric consumer PC company, with less than 10 percent of our business in this segment," said CEO Carly Fiorina in a prepared release. "The fact is, we anticipated that the bulk of our growth in fiscal 2001 will be driven by strong momentum in our Internet infrastructure and printing businesses."
Following HP lackluster fourth-quarter results, Fiorina took full responsibility for the shortfall.
The $13.3 billion in sales was only a 13 percent improvement from the fourth quarter of 1999.
Worse yet, operating expenses rose 17 percent, far above the company's guidance of 9 percent to 12 percent.
At the time, HP said higher-than-expected October selling costs, margin pressures and the soft euro were the biggest liabilities.
Looking ahead, HP said it sees operating expenses rising 10 percent to 12 percent from the year-ago period.
"We foresaw a significantly different market environment in 2001, and accordingly planned for only single digit growth in our U.S. retail PC business," Fiorina said. "While softness in that market has been somewhat greater than we had originally anticipated, we are still experiencing growth over record fiscal 2000 sales levels and our sales this Thanksgiving week were ahead of last year."
HP's decision to comment on its first-quarter and fiscal 2001 sales undoubtedly stems from Gateway's (NYSE: GTW) stunning profit warning after the bell Wednesday.
Gateway said that it will miss analysts' estimates by 25 cents a share in its fourth quarter. Sales will check in around $2.55 billion, roughly $500 million below estimates.
HP shares moved up to a 52-week high of $78 in April.
Fifteen of the 21 analysts following the stock maintain either a "buy" or "strong buy" recommendation.