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HP dials back profit expectations on PC market slump, China weakness

FILE PHOTO: The logo for The Hewlett-Packard Company is displayed on a screen on the floor of the NYSE in New York

By Zaheer Kachwala

(Reuters) -HP Inc tempered expectations for annual profit on Tuesday, as it grapples with a more than a year-long slump in the personal computers segment and sluggish demand in key market China.

Shares of the Palo Alto, California-based company fell 5.2% in after-market trading.

Inflation and an uncertain global economy triggered a decline in demand for consumer electronics including PCs last year, and led to increased inventory across the supply chain.

"While we expect another quarter of sequential growth in the fourth quarter, the external environment has not improved as quickly as anticipated and we are moderating our expectations as a result," said HP's CEO Enrique Lores.

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PC shipments including desktops, notebooks and workstations to China have dropped 19% in the past few months as the region remains cautious about spending on IT, according to analysis firm Canalys.

"We don't see it (a recovery in China) happening anytime soon. And at this point, we are not building that recovery in any of our plans," Lores added.

HP now forecasts adjusted earnings per share to be in the range of $3.23 to $3.35 from earlier expectations of $3.30 to $3.50.

The company's third-quarter revenue dropped 9.9% to $13.20 billion compared with analysts' estimates of $13.37 billion, according to Refinitiv data.

However, a focus on controlling costs helped the PC maker report adjusted earnings per share of 86 cents, in line with analysts' estimates.

Total costs and expenses also fell 8.6% from a year earlier.

The company remains on track to deliver 40% of its three-year cost savings target by the end of the fiscal year.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Krishna Chandra Eluri)