It is likely that Hewlett-Packard Company (NYSE:HPQ) could be forced to trim its 2015 outlook for a second time. The company’s printer, IT services and PC businesses are likely to be impacted adversely by a weaker euro currency. The impacts on those segments could offset the gains in the server market, leading to overall revenue decline. Analysts at Barclays downgraded their rating on Hewlett-Packard citing the above concerns.
According to the Barclays analysts led by Ben A. Reitzes, there is possibility that Hewlett-Packard Company (NYSE:HPQ) could trim its 2015 forecast again. They believe the second cut in 2015 performance outlook could come in May. Hewlett-Packard slashed its guidance for this year in February.
The reason Hewlett-Packard Company (NYSE:HPQ) may have to narrow its outlook for 2015 for a second time is that the stronger U.S. dollar is a source of pressure on the company’s pricing. For example, the appreciation of the dollar against foreign currencies such as euro makes it difficult for Hewlett-Packard to stimulate demand through offering of huge discounts. Additionally, stronger dollar may also further hurt the sale of PC and printing solutions in the euro-dominated EMEA region because of higher costs.
Hewlett-Packard Company (NYSE:HPQ) generated 35% of its revenue from the EMEA region, which is another reason continued currency hiccups in the market could push the company to revise 2015 outlook downwards.
Barclays downgraded Hewlett-Packard Company (NYSE:HPQ) to “equal-weight” from “overweight”. The company’s target price was cut to $35 from $42. However, the analysts noted that Hewlett-Packard’s CEO, Meg Whitman, is doing a great management job in the company.
Hewlett-Packard Company (NYSE:HPQ) plans to break up into two standalone companies whereby one will be called Hewlett-Packard Enterprises and the other HP Inc. The former will deal with the PC and printing businesses while the latter will take care of mainly IT operations focused on corporate clients. Because of the planned breakup, the company said it expects a charge of $1.3 billion in fiscal 2015 and another charge of $500 million in 2016.
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