Apotheker Bombshell: HP In For Tough 3Q


HP President and CEO Leo Apotheker warned in a May 4 internal e-mail that the company needs to tighten its belt during the third fiscal quarter, according to Bloomberg.

In that internal e-mail, which was sent by Apotheker to executives including Todd Bradley, executive vice president of the personal systems business, and Cathie Lesjak, CFO, Apotheker said that the company was in for "another tough quarter" and that the company must "watch every penny and minimize all hiring," Bloomberg reported on Monday.

The memo also suggested possible layoffs were in store for HP. HP's existing headcount plans are “unaffordable given the pressures on our business,” Bloomberg quoted Apotheker as writing.

“Q3 is going to be another tough quarter, one in which we will be driving hard for revenue and profit. We have absolutely no room for profitless revenue or any discretionary expenditures,” Apotheker further wrote, according to Bloomberg.

HP on Wednesday is scheduled to announce its second quarter financial results. [UPDATE: HP late Monday said it has moved up the scheduled release of its second quarter earnings to Tuesday morning at 7:30amET, to be followed an hour later by a conference call to discuss the results with financial analysts]. The company had been expected to discuss a disappointing forecast for the third quarter.

Aaron Rakers, an analyst with Stifel Nicolaus, wrote in a research brief on Monday that HP is showing some weaknesses, particularly in its PC business.

"We would note that over the past couple of weeks, there have been other articles/news stories circulating that have cited what we have considered increasingly well-known/discounted weakness in HP’s PC business as well as very little room for excess spending," Rakers wrote.

Rakers further wrote that in HP's earnings release, the focus will also be on HP's enterprise server, storage, and networking businesses in relation to such competitors as Cisco and EMC, as well as whether HP can maintain its printer business margin and on how well it is improving its short-term services business.

HP declined to comment on the news.