Hewlett-Packard Warns, This Time Blaming Asia and Latin America

Updated from 11:54 a.m. ET

Weak demand in Asia and Latin America is weighing on Hewlett-Packard's (HWP) fiscal third quarter, the company said Wednesday at its semiannual analyst meeting.

CEO Carly Fiorina opened the meeting by warning analysts that weakness in the U.S. and European markets has extended to Korea, China and Latin America. May sales were soft in both consumer and corporate markets in all regions, making H-P "more cautious" about its third-quarter revenue projection, Fiorina said.

But the executive also said that cost controls will "increase the probability" that Hewlett will meet EPS estimates, which the company pegged at 23 cents for the fiscal third quarter, which ends in July. Analysts polled by Thomson Financial/First Call expect the company to earn 22 cents a share on revenue of $11.5 billion.

H-P shares dropped $1.34, or 4.5%, to $28.71.

Just three weeks ago, H-P warned investors that its third quarter would be weaker than expected. The company said then that third-quarter revenue will be flat to 5% lower than the second quarter's $11.6 billion.

"We're more convinced that this is a global IT slowdown that will last for some time," Fiorina said.

Earlier Wednesday, Compaq (CPQ) Chairman Michael Capellas said that his company is seeing softening in Europe.

This isn't just the economy, of course. After all, this is H-P. Fiorina said that the company is still struggling with "execution issues," including its continuing effort to resolve cases where the company's own server salespeople compete with the company's own reselling partners. "This is not a quick fix item," she said.

H-P plans to take additional expense control measures this quarter. This will necessarily involve some layoffs; Fiorina noted that the company plans to keep overall headcount flat in the third quarter, while hiring employees in outsourcing and consulting, and for certain sales positions, including storage. In April, Hewlett-Packard set plans to fire 3,000 managers to trim its costs. The company employs about 88,500 workers.

Other cost controls will include canceling or deferring internal tech projects that don't pass review, clampdowns of expense budgets and forcing employees to take six vacation days in the second half of the year

A steady drumbeat of warnings has made investors very skeptical about the H-P's ability to grow its business and kept the company's shares under steady pressure all year. Tuesday's warning was the company's fifth this year, with the first coming Jan. 11, the second Feb. 15, the third April 18 and the fourth May 16.

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