SAN JOSE, Calif. – Hewlett Packard Co.'s (HPQ) shares tumbled 15 percent Thursday after the computer and printer giant reported weaker-than-expected third-quarter results because of "unacceptable execution" by its server and storage business. HP also said its current quarter would fall below expectations.
The company said its overall revenue jumped 9 percent and most divisions — personal computers, software, services and printers — performed well.
"These solid results were overshadowed by unacceptable performance in enterprise systems and storage," said Carly Fiorina, HP's chief executive. "Here, execution issues cost us, and we are therefore making immediate management changes."
She did not immediately outline any specific personnel moves but said an announcement would be forthcoming. She also said the company has resolved most of the issues, though some won't be fixed until the end of the fourth quarter.
HP shares were down $2.95 at $16.57 on the New York Stock Exchange (search).
Specifically, the division's U.S. operations were hurt by a difficult transition to a new ordering processing and supply chain computer system. As a result, the tech giant missed some sales and had to take expensive measures such as air shipments to keep customers satisfied.
HP also said there was overly aggressive discounting and other problems in Europe. Finally, average prices for storage systems fell more dramatically than expected.
Fiorina, who has been conservative in her forecasts of corporate spending on technology, also said economy played a role in HP's problems, though she declined to say by how much.
"It's fair to say in the last month or so of the quarter, we did see a slowing — the economy did a bit of a stutter step," she said. "That is why we did not see the normal acceleration in demand toward the end of quarter."
For the three months ended July 31, HP earned $586 million, or 19 cents per share. That's nearly double the $297 million, or 10 cents per share, in the same period last year.
Sales grew to $18.9 billion in the third quarter, compared with $17.3 billion last year.
Wall Street analysts were expecting fourth-quarter earnings of 31 cents per share on sales of $19 billion, according to a survey by Thomson First Call.
HP also said per-share earnings in the current quarter will be between 35 cents and 39 cents with sales expected to be between $21 billion and $21.5 billion.
Analysts were expecting a per-share profit of 43 cents per share on sales of $21.3 billion in the fourth quarter.
The company said revenue in personal systems grew 19 percent year-over-year, and sales in imaging and printing rose 8 percent. The company's enterprise servers and storage posted a 5 percent revenue decline, but sales in HP services and software grew 12 percent and 17 percent, respectively.
The results were nearly a week earlier than expected. Palo Alto-based HP had been scheduled to report its results Aug. 18.
Year-to-date, the company has earned $2.41 billion, or 78 cents per share, on revenues of $58.52 billion. At the same time a year ago, HP earned $1.68 billion, or 55 cents per share, on revenues of $53.21 billion.