UPDATE 4-HP slashes outlook, spends on services overhaul| Reuters


* EVP Livermore to directly oversee services unit

* Missing ‘significant’ opportunities in services

* But saw strength in enterprise, commercial businesses

* Shares down 9 percent (Adds company comments. Updates shares)

By Poornima Gupta and Jim Finkle

NEW YORK, May 17 (Reuters) – Hewlett-Packard Co (HPQ.N) slashed its 2011 profit forecast as it prepares to spend heavily to revamp a troubled corporate services division.

Chief Executive Leo Apotheker, who took the helm in September, blamed the division’s “missed opportunities” under his predecessor Mark Hurd.

Apotheker vowed on Tuesday to revamp the division to focus on consulting, cloud computing and higher-margin businesses, and away from less profitable endeavors such as computer maintenance.

HP also trimmed its sales forecast for the second straight quarter, sending its shares down 9 percent to its lowest level since June 2009.

The expansion in services comes as the global PC industry is under siege from the growing popularity of mobile devices such as Apple Inc’s (AAPL.O) iPad.

HP’s sales of PCs in the second quarter slid 5 percent to $9.4 billion.

“It sounds like Hurd took too many costs out of (the services) business and didn’t reinvest in positioning it in cloud and other things,” said Cross Research analyst Shannon Cross. “Leo is doing that now.”

The sluggish industry-wide consumer PC market plus the lingering supply impact of Japan’s earthquake are expected to hurt the world’s largest technology company’s profits for the rest of the year.

Apotheker indirectly blamed the services unit’s problems on Hurd, who left the company in August amid allegations of sexual harassment.

HP acquired the division when it bought Electronic Data Systems in 2008, adding services ranging from help-desk support for personal computers to advising corporations on rebuilding their data centers to take advantage of new “cloud computing” technologies.

Cloud computing refers to the use of Web-based servers to deliver a range of services to large businesses and organizations.

Apotheker said that business had failed to expand quickly enough into more profitable services such as consulting, where it competes with IBM (IBM.N) and Oracle Corp Accenture (ACN.N).

“We are missing significant market opportunities,” Apotheker said in an interview with Reuters.
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This post was submitted by prashant agarwal.

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