HP seeks stability in 2012 after rocky year

Mon Nov 21, 2011 7:11pm EST
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By Poornima Gupta

SAN FRANCISCO (Reuters) - Hewlett-Packard Co will ramp up spending on research, sales and turning around its flagging services arm in 2012, after its fourth-quarter profit fell nearly 91 percent on weak computer sales.

The world's largest technology company by sales also gave a modest earnings forecast for fiscal 2012, setting a low bar for new CEO Meg Whitman in what she called a "reset and rebuilding year."

Better-than-expected quarterly results suggested the storied Silicon Valley company was finding its feet after a tumultuous year, but executives said its turnaround effort will entail major -- and as yet unquantified -- investments in research and development and in expanding personnel and internal systems.

Whitman also warned of serious challenges to growth from a worsening external environment, including dwindling demand from Europe. Flooding in Thailand has choked off the supply of hard drives, driving up prices for the crucial components in personal computers.

"We have got some HP-specific challenges," Whitman said in an interview. "We have got to improve execution, we have got to turn our services business, we have got to manage down our IPG channel (imaging and printing group) inventory, we have got to turn around China."

The former eBay Inc CEO, who took over at HP only in September, also said a slow global economy, and Europe in particular, was another challenge along with flooding in Thailand.

"This is going to be disruptive for the industry in Q1 and Q2," she said, adding the full impact of the flooding was still unclear.

HITTING 'RESET'   Continued...