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HP's Earnings To Shed Light On PC, Services Trends

HP is facing a classic big-company problem of finding ways to meaningfully improve revenue, and any dips in its most important categories are warning signs.

SAN FRANCISCO (AP) -- Hewlett-Packard Co. is scheduled to report its fiscal second-quarter results on Wednesday after the market closes. The results cover the quarter ended April 30.

WHAT TO WATCH FOR: Any further declines in HP's services and personal computer divisions, both of which had unexpected revenue shortfalls last quarter.

HP is facing a classic big-company problem of finding ways to meaningfully improve revenue, and any dips in its most important categories are warning signs. HP's forecast -- it expects to generate $130 billion or more in revenue this year -- was lower than expected when the Palo Alto, Calif.-based company issued the projection in February. HP's new CEO, Leo Apotheker, said the company underestimated the weakness in the consumer PC market and that the services business was dragged down by weakness in short-term signings.

WHY IT MATTERS: HP is the world's biggest technology company by revenue, and few companies are as good a proxy for the health of the overall technology market. HP is a player in all the key segments, from PCs and servers to networking gear and services. Apotheker says he wants to make software a bigger focus.

But the company still can have issues that don't necessarily reflect broader industry trends. For instance, IBM Corp.'s services revenue rose in the latest quarter, and in PCs, Intel Corp., the world's biggest maker of PC chips including for companies such as HP, reported stronger-than-expected results based on stronger sales to corporations.

HP's stock has fallen 17 percent since the disappointing earnings results in late February, knocking about $17 billion off of HP's market capitalization, which now stands around $87 billion.

Apotheker took over as CEO in November after his predecessor, Mark Hurd, left following a sexual harassment scandal, in which Hurd was found to have submitted inaccurate expense reports but HP's board found no evidence of harassment.

WHAT'S EXPECTED: Analysts polled by FactSet expect that HP earned $1.21 per share, excluding items, on $31.56 billion in revenue.

LAST YEAR'S QUARTER: In the same period last year, HP earned $1.09 per share, excluding items, on $30.85 billion in revenue.
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