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2nd UPDATE: H-P Repeats Full-Year Outlook Despite Downbeat 2Q View

--Hewlett-Packard net is cut nearly in half

--Company gives outlook below expectations

--Analysts say long-term outlook looks good

(Updates with executive comments in seventh and eighth paragraphs)

By Ian Sherr and Ben Worthen

SAN FRANCISCO -(Dow Jones)- Hewlett-Packard Co. (HPQ) said its fiscal first- quarter earnings were nearly half what they were a year earlier, as sales in the company's personal-computer business continued to fall.

Shares slid 1.4% to $28.55 in recent after-hours trading as H-P's revenue missed analyst expectations and the company issued a downbeat outlook for the current quarter.

For the second quarter, the No. 1 PC maker by unit shipments sees an adjusted per-share profit of between 88 cents and 91 cents, while analysts polled by Thomson Reuters see a per-share profit of 95 cents.

Cathie Lesjak, H-P's chief financial officer, told The Wall Street Journal in an interview the mixed results and poor outlook were the result of a tough economic environment along with continuing hard-drive-supply problems that have plagued the industry since floods hit Thailand, a major manufacturing hub, late last year.

She also said some of the company's woes are self-inflicted, repeating previous assertions by company executives that the effects of years of under- investment have begun to show.

"We've under-invested," she said, adding now, "There are challenges in most of our businesses."

Meg Whitman, H-P's chief executive, echoed those concerns on a conference call with analysts, adding the company had become too large to execute on its strategy in a nimble and quick-enough manner.

"It's our own execution," she said, singling out the company's large and sprawling product line, as well as an inefficient supply chain, as contributors to the company's troubles. "We've got to get better across the board."

The company had a turbulent year in 2011, which included an $10.3 billion deal for British software provider Autonomy Corp. and the firing of Leo Apotheker, then the company's chief executive, in September. Apotheker had set the company toward potentially spinning off its PC division but Whitman in October decided to keep the business, though it operates at lower margins than some of H-P's other businesses.

Still, H-P has been hard hit by slowing consumer and corporate spending, and its additional efforts haven't expanded quickly enough to offset those lost sales.

While H-P's outlook for the second quarter may have missed Wall Street expectations, Brian Marshall, an analyst at ISI Group, said the company also could be setting itself up to under-promise and over-deliver.

"The key metric here is [earnings per share]," he said, noting H-P reiterated its profit expectations of $4 per share for the year. "They'll proceed through the quarter, improve the portfolio and increase margins."

For the period ended Jan. 31, H-P reported a profit of $1.47 billion, or 73 cents a share, down from $2.61 billion, or $1.17 a share, a year earlier. Excluding restructuring charges and other impacts, per-share earnings fell to 92 cents from $1.36.

In November, the company predicted earnings of between 83 cents and 86 cents a share, below analyst estimates at the time.

Revenue slid 7% to $30.04 billion, below analysts' estimated revenue of $30.67 billion.

H-P's operating margin narrowed to 6.8% from 10.5%.

Revenue from the company's services segment rose 1.1%, while H-P's enterprise servers, storage and networking segment's revenue fell 10%.

Sales in H-P's core PC business slipped 15% as unit shipments decreased 18%. Notebook revenue slumped 15%, while desktop revenue fell 18%. The company's printer unit saw revenue decrease 7%.

H-P's stock hit its lowest level in more than five years in September, but has climbed 35% since then.

-By Ian Sherr, Dow Jones Newswires; 415-439-6455;

ian.sherr@dowjones.com

--Nathalie Tadena contributed to this article.

  (END) Dow Jones Newswires
  02-22-121912ET
  Copyright (c) 2012 Dow Jones & Company, Inc.