Friday, September 28, 2012

Jefferies cuts HP on weak PC business, risk from mobile push

(Reuters) - Jefferies & Co downgraded Hewlett-Packard Co to "underperform" from "hold," saying it continued to expect problems in the company's personal computer, services, and printer businesses.

The world's largest personal computer maker has been struggling with shrinking PC sales as consumers opt for smartphones and tablets, tough economic conditions in Europe and slowing growth in China.

HP recently wrote down $13.9 billion in assets related to its purchase of Electronic Data Systems Corp.

Jefferies also said it expects HP to aggressively invest in the smartphone and tablet markets, which may be risky, and cut its price target on the company's stock to $14 from $17.

Shares of the company, which closed at $17.11 on the New York Stock Exchange, were down 1.4 percent at $16.87 in premarket trading on Thursday.

Recent comments from HP suggest it may be focusing on tablets and smartphones again, despite its botched acquisition of Palm, Jefferies analyst Peter Misek said in a note to clients.

"While the move makes sense strategically, we see it as a high risk move. On top of adding costs and working capital burdens to an already stressed balance sheet, there could be additional write-offs," Misek said.

Misek is a four-star rated analyst for the accuracy of his earnings estimates on HP, according to Thomson Reuters Starmine data.

He expects HP's services business, which provides outsourcing and support services, to decline as old service contracts of its AlphaServer product taper off in 2013 and inventory problems at its printer business to take several quarters to be resolved.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Joyjeet Das)

(sayantani.ghosh@thomsonreuters.com; within U.S. +1 646 223 8780, outside U.S. +91 80 4135 5800; Reuters Messaging: sayantani.ghosh.reuters.com@reuters.net)

Source: http://news.yahoo.com/jefferies-cuts-hp-weak-pc-business-risk-mobile-105845524--finance.html

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