Why does every earnings leak lead into bad news?
NetApp
Hewlett-Packard
The second quarter itself wasn't terrible. With $1.24 of non-GAAP earnings per share on $31.6 billion in sales, the results fell pretty much in line with Wall Street expectations. But that's after adjusting their targets for last quarter's disappointing guidance, and then HP made it worse by lowering its full-year forecast again.
That's why HP shares fell as much as 9.4% in intraday trading yesterday, nearly setting a 22-month low in the process that was only equaled when the Mark Hurd scandal hit the fan last summer. Taking nearly 10% off an $86 billion market cap overnight is no mean feat.
HP explained its dour outlook with fallout from the disasters in Japan, exacerbated by slow sales of consumer PCs and an underperforming enterprise services segment. That leaked memo told HP managers to keep a close eye on costs and new hires, because "another tough quarter" is already under way.
I find the Japanese excuse interesting, because neither Cisco Systems
Maybe it's just harder to keep bad news under wraps. Perhaps it's just easier to go about your business after finding a shoulder to cry on. Either way, HP shares now trade for 9.3 times trailing earnings and less than seven times next-year forecasts. You almost have to believe that the stock is going to zero if you're not licking your lips over the discounts here -- and HP is both too big and too smart to die.