HP shares sink after Goldman Sachs downgrade to ''sell''

SAN FRANCISCO Tue Apr 2, 2013 2:36pm EDT

A Hewlett-Packard logo is seen at the company's Executive Briefing Center in Palo Alto, California January 16, 2013. REUTERS/Stephen Lam

A Hewlett-Packard logo is seen at the company's Executive Briefing Center in Palo Alto, California January 16, 2013.

Credit: Reuters/Stephen Lam

Related Topics

SAN FRANCISCO (Reuters) - Hewlett Packard Co (HPQ.N) shares fell 6 percent on Tuesday after Goldman Sachs downgraded them to "sell," warning that investors may be overestimating the company's chances of a successful turnaround while it grapples with its declining PC and printing business.

HP, in the midst of a restructuring that Chief Executive Meg Whitman has said will take years, is also struggling with intense competition in its servers and storage hardware division, the investment bank said in a research note.

Coupled with the need to re-invest any savings from its current overhaul in research and business development, its earnings may continue to come under pressure this fiscal year and beyond, Goldman said.

Wall Street's "consensus is attributing an unreasonably high probability to the turnaround's success and incorrectly assuming fundamentals have already bottomed," it wrote.

"In contrast, we believe EPS expectations could face downward revisions in coming quarters."

HP, the world's largest PC maker, has struggled with a fundamental erosion of demand for computers and printing supplies such as ink cartridges as consumers shift to mobile devices.

Whitman is pushing the company to re-focus on enterprise services, but there it goes up against heavy-hitters like IBM (IBM.N), EMC Corp (EMC.N), Dell Inc DELL.O and other IT providers.

Shares of HP, which gained more than 60 percent in 2013, traded at $21.85 at mid-day, down 6.3 percent.

(Reorting by Edwin Chan; Editing by Steve Orlofsky)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
Mott wrote:
Not much subtance in the analysis itself. Unreliable statements such as – “intense competition in its servers and storage” whereas, HP is poised to gain from Dell converts and the Moonshot servers.

Apr 03, 2013 2:01am EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.