Tech vendor financial reports this week painted a portrait of the state of the hardware, peripheral and chip markets this year: smartphone-related products are selling well, but technology tied to PCs is having a rough time.
At its annual financial analyst day Wednesday, a blunt Hewlett-Packard CEO Meg Whitman said the company has some tough choices to make and a game of catch-up to play over the next few years. The company said it now expects earnings per share of US$3.40 to $3.60 this fiscal year. That's significantly below the estimate of $4.18 from analysts polled by Thomson Reuters.
"I believe that five years from now, if we don't have a smartphone or whatever the next generation of that device is, we'll be locked out of a huge segment of the population in many countries of the world,"
HP's turnaround plan includes cutting the number of PC models it sells by 25 percent over the next two years.
Revenue is expected to fall in every business division, with the exception of software. "The single biggest challenge facing Hewlett-Packard has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices, and frankly some significant executional miscues. This is important because as a result it is going to take longer to right the ship than any of us would like," Whitman said.
HP shares declined this week, closing down by $0.21 to $14.73 Friday.
HP's acknowledgement of the need to cut back on PC models will affect the supply chain, analysts said.
"That is not a good sign," said Vijay Rakesh, an analyst for Sterne Agee, in a report on the chip market.
The reduced number of HP PC models will affect Intel and Advanced Micro Devices, which still derive 65 percent to 75 percent of their sales from PC, Rakesh noted.
Failure to succeed in the mobile market affects a wide range of players. Online games maker Zynga, for example, said late Thursday that it now expects 2012 bookings of nearly $1.09 billion to $1.1 billion, down from a prior forecast of between $1.15 billion to $1.23 billion. Bookings represent in-game purchases of virtual goods. The company's uphill battle in the mobile realm is largely blamed for the loss.
Shares of Zynga fell $0.34 to $2.48 Friday.
Meanwhile, showed what success in the mobile market can mean. The South Korean company said sales of its Galaxy mobile devices would fuel a record quarterly operating profit of 8.1 trillion won ($7.3 billion), up 90 percent year over year. The figure handily beat the estimate of 7.58 trillion won compiled by Bloomberg.
The Samsung news was not enough to buoy shares of tech companies on the markets, however. While the Dow Jones Industrial Index closed up by 34.79 at 13,610.15 Friday, the Nasdaq Computer Index slipped by 14.53 to 1,664.80. Nasdaq Computer stocks are still up in aggregate by 21 percent for the year, but tech shares have slumped a bit recently in the face of continuing economic uncertainty.
The strong U.S. labor report Friday did not help boost the tech sector. The U.S. Labor Department said that the unemployment rate in the U.S. fell to 7.8 percent in September from 8.1 percent the prior month -- its lowest level in more than three-and-a-half years.