HP's fall punctures tech market hopes

Hewlett Packard yesterday dampened the hopes of a nascent recovery in the technology sector that have recently driven Wall Street's Nasdaq market to 16-month highs.

Shares in HP were trading at almost 10% lower yesterday morning, falling $2.15 to $19.95 after it reported third quarter results late on Tuesday that disappointed Wall Street expectations. HP also warned that it would be likely to fall short of analysts' forecasts in the current quarter.

The company said it would cut a further 1,300 jobs from its global workforce on top of the 3,500 already announced.

HP cited aggressive competition and low prices in the personal computer market that were eating into margins, along with weak sales in the corporate market.

Carly Fiorina, HP's chairman and chief executive said: "The third quarter is always tough, but we still should have done better. Nevertheless, we are confident in our strategy and the actions we are taking."

She added: "In some cases we took prices further [down] than we needed to."

Investors appeared divided over whether HP's problems were peculiar to the company, which acquired its rival, Compaq, last year, or were a commentary on the technology market. The Nasdaq index fell yesterday morning before recovering with a modest 1.8-point rise to 1763 at midday.

The Dow Jones index of blue chips, which includes HP, was 25 points lower at 9404 and later fell below 9400.

The fierce competition in the PC market shows no signs of abating. Yesterday Dell Computer reduced prices on certain business and consumer products by as much as 22%.

HP reported a profit of $297m (£186m) yesterday, against a $2bn loss a year ago, which included huge restructuring charges related to the Compaq takeover. Sales were $17.3bn, against $16.5bn, but the gain was due to the weaker dollar.

Ms Fiorina said spending on IT seemed to have stabilised in the US and much of the rest of the world though Europe is still weakening.