The PC sector has so many left feet that the shoes could keep dropping forever.
missing third-quarter earnings estimates by a colossal 10 cents Monday morning,
has become the latest boxmaker to disappoint investors in one way or another this fall, joining
is the only major boxmaker to make it unscathed through an earnings season that bears are growing increasingly confident will usher in the end of the PC sector as a high-growth industry.
"I spoke to Gateway," said an analyst attending CEO Carly Fiorina's keynote who didn't want his name used. "They said they were fine. But I'm scared to death. They say H-P's problems are H-P's problems. But Intel, Apple, H-P, Dell -- they're so diversified." Gateway reported third-quarter earnings and revenue in line wth expectations last month. Its fourth-quarter results come in January.
H-P cited the euro as one reason for its problems on the bottom line in the third quarter. But it's hard to ignore the great bugbear of all commodity industries: falling profit margins. The strong revenue growth the company managed to get from its PC business was boosted by price-slashing, a specter Dell CEO Michael Dell raised last week when his company
moderated its growth forecast for the next year.
There were also difficulties on the Unix server front. Growth there was held down on the high end by the fact that H-P's new Superdome tower won't start shipping until January. But the company's midrange Unix products continue to face a tough pricing environment as H-P tries to wrest share from industry giant
. Profit margins were also hurt in the Unix segment by special "sales incentives," the company said.
H-P was off $5.88, or 15%, to $33.25 in afternoon trading. But the PC sector in general has been too badly battered to plunge en masse yet again. Dell and IBM, for their parts, were each moving higher. Gateway, which reports its fourth quarter in January, was off fractionally at $39.
It's fair to say that Wall Street's love affair with Fiorina has lost most of its passion. The credibility she'd built from the turnaround she oversaw at H-P in the year after taking the helm took a hit back in August, when the company reported upside earnings that included some questionable nonoperating gains. Fiorina's attempt to present the quarter as a blowout clearly irked many analysts who felt they hadn't been given proper guidance.
Today's disappointment fuels that feeling. H-P had investors believing that everything was fine after
warned in September -- just like Dell had done before it came clean on the problems it was having meeting its revenue-growth target.
"These are big companies," says
analyst George Elling, who's maintaining his buy rating on H-P, which he sees as a bargain at these levels. "They're complex companies, with a lot of issues that we don't know about, that I don't think anybody ever really knows."
Fiorina didn't have much to say on the subject of H-P's earnings shortfall this morning in Las Vegas, where she was giving the keynote address at
, the world's largest computer trade show. Beginning her remarks, she asked: "Do CEOs get to ask for a recount?"
The Comdex crowd seemed amused. But Vegas is a long way from Wall Street.