Moody's puts HP's ratings on review
NEW YORK (AP) — Moody's Investors Service on Thursday placed its long-term credit ratings for Hewlett-Packard Co. on review for a possible downgrade after the technology company issued a disappointing forecast for the coming year.
HP's CEO Meg Whitman told analysts Wednesday that internal and economic turmoil will cause HP's earnings to fall by more than 10 percent next year. That decline was not anticipated by Wall Street and came after the company reported its biggest quarterly loss in company history.
Moody's said it is putting the company's investment-grade "A3" senior unsecured ratings on review, citing management's revised expectations for profitability and cash flow, as well as HP's extended timetable for improvement in its business. The rating agency said this increases the likelihood that the company's debt load would be higher than expected.
The rating agency said it will be looking at HP's ability to stabilize and then improve its profitability and cash flow, while making spending reductions that don't disrupt its business. Moody's will also be looking at management's strategy to better focus its broad product portfolio and improve the consistency of its business performance.
The agency noted that HP still has cash and short-term investments of $9.5 billion as of July, giving it a good liquidity profile.
HP, headquartered in Palo Alto, Calif., is struggling with problems that stem from a combination of managerial malaise, high-priced acquisitions that haven't paid off, and an inability to offset the damage done to its personal computer and printer divisions by the rising popularity of smartphones and tablet computers.
Whitman says she inherited a bloated, poorly managed company that hasn't been innovating quickly enough in any of its divisions. She has said a recovery will take several years to complete.
HP's stock fell 13 percent after Whitman's presentation Wednesday. It rose 3 cents to close at $14.94 on Thursday.
The stock has lost half of its value since February.
