Hewlett-Packard, based in Palo Alto, California, dropped $5.91, or 20 percent, to $23.60 at 4 p.m. on the New York Stock Exchange. The decline was the largest since October 19, 1987, the market crash known as Black Monday. The drop erased $16.2 billion from Hewlett-Packard’s market value since Aug. 17, the day before the company’s plans were made public.
Leo Apotheker cut sales forecasts for the third time since becoming CEO in November, citing tepid demand. He’s spinning off the personal computer unit, dropping a five-month-old plan to put the WebOS mobile software on devices and purchasing Autonomy Corp. for $10.3 billion. While aimed at helping adding higher- margin products, the shifts are costly and may be time consuming, said Brian Marshall, an analyst at Gleacher & Co.
“People just lost confidence in the company,” said Marshall, who is based in San Francisco and has a “buy” rating on the stock. “People are realizing the financial model is in greater disarray than they previously thought.”
Standard & Poor’s and Moody’s Investors Service said they may cut their credit ratings on Hewlett-Packard’s debt. S&P gives the company its A rating and Moody’s ranks it A2, both the sixth level of investment grade.
Investors may be concerned by the amount of time it will take to execute the changes, Marshall said. Evaluation of strategic options for the PC unit may take 12 to 18 months to complete, the company said.
