HP also said it would lay off up to 3,000 people in management positions as part of broader cost-cutting moves.
Shares ticked up on the news, rising $3.57 to $32.82 in afternoon trading.
HP now expects to see earnings of between 13 cents and 17 cents per share for the second quarter, compared with the 44 cents per share it earned in the year-ago quarter. The figures include a $150 million charge to write off consumer product inventory. Wall Street analysts were expecting the company to record earnings of about 35 cents per share, according to First Call.
Revenue should be 2 percent to 4 percent lower than the $11.9 billion recorded in the first quarter. Analysts were hoping to see the company record revenue of $12.19 billion, according to First Call.
In addition to making job cuts, the company said it would trim costs by tightening discretionary spending and requiring employees to take time off.
CEO Carly Fiorina said the company wasn't able to predict how badly it would be affected by economic factors when it previously issued forecasts.
"At this time, it is quite clear that the U.S. downturn in the consumer market is now spreading to other regions, notably Europe," she said.
Recent market data suggests Europe is seeing a slowdown in PC sales that's similar to the one in the United States, she said, with "growing softness in the retail sector and increasingly competitive pricing followed by a more subtle but just as meaningful slowdown in the enterprise space."
However, Fiorina added that HP did see a slight improvement in its enterprise business, and she said revenue for that division should be even with or slightly higher than they were in the first quarter.
"Recovery is too strong a word," she said, but added cautiously that signs point to the "second quarter being a bottom."
She said the company's earlier forecasts had been based on there being no further deterioration in the United States, no slowdown in Europe and stable exchange rates. "Unfortunately our concerns were warranted," Fiorina said.
Consumer PC sales in Europe showed strong gains in 2000, she said, but growth "evaporated" this year. The European consumer businesses overall significantly under-planned, Fiorina said.
Looking ahead, she said the company plans to continue to fight it out to maintain market share in its printer business, with a focus on the low-end of that market. HP did cancel plans to increase capacity for the high-end inkjet business, but Fiorina noted that "we are simply not willing to relinquish any ground in this market."
As for PCs, HP will be "pursuing profitability as opposed to share growth," she said
However, Merrill Lynch analyst Thomas Kraemer said, "We believe that the losses for printer hardware and PCs are starting to mount. We do not believe that HP has good visibility here."
Goldman Sachs analyst Laura Conigliaro noted, "We believe HP's long-term growth rate is probably closer to 10 to 12 percent, rather than the 15 percent-plus type of growth that the company had been targeting."
"All of HP's key businesses are below plan or at the low end of a planned range," she wrote in a research note, adding that "even the enterprise segment, which HP identifies as its strongest, is pretty weak."
Conigliaro lowered fiscal 2001 earnings estimates to $1.20 per share from $1.45 per share.
HP in good company
HP is not alone among major PC makers in its recent struggles.
Compaq said in March that it would miss estimates for the first quarter and cut 5,000 jobs, while Dell reported earlier this month that it would post its first quarterly revenue decline in 17 years.
Market research firm Dataquest in March said worldwide PC sales would grow just more than 10 percent, about four points slower than a year ago. And Merrill Lynch analyst Steve Fortuna recently cut his worldwide PC unit growth to 7 percent from 12.5 percent and lowered revenue growth to minus 2.8 percent.
But some companies have indicated that things may be turning around. Intel said Tuesday that its PC sales had stabilized, although weakness in that sector was partially responsible for the chip giant's drop in revenue.