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Moody`s cuts HP’s rating

Publish Date29/11/2012 12:28:37 PM

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Moody`s cuts HP’s rating

Moody`s lowered on Wednesday the long-term credit rating of Hewlett-Packard (HP), citing future troubles.

Moody`s sees that the technology giant will have problems with the sales of many of its products.

The long-term credit rating of the Californian based company was lowered to Baa1 from A3 with a negative outlook.

Moody`s also warned that the credit rating could be lowered further as the rating agency expects HP’s revenues to drop 5% next year and its profit margin will narrow.

“HP`s finances will remain weaker than previously expected. It`s not certain whether HP can restore growth and profitability”, said Moody`s senior vice president Richard Lane.

This downgrade will affect about $25 billion of HP bonds. HP’s troubles began since the company faces increasing competition from tablet computers and smartphones, mainly from Apple and Samsung.

It was only last week that HP wrote-down $8.8 billion because the company it bought last year, Autonomy, lied about its finances.

Moreover, Electronic Data Systems, the technology consulting company HP bought for $13 billion, is not doing well either.

Due to the troubles in Autonomy and EDS, HP is facing the biggest losses in its 73-year history, as the two absorbed about $17 billion in accounting charges in 6 months.

HP`s market value dropped by half since the beginning of the year, and its shares now trade at $12.70.

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