HP slashes outlook as spends on service overhaul

Hewlett-Packard has slashed its 2011 profit forecast as it prepares to spend heavily to revamp a troubled division that provides everything from computer maintenance to high-level tech consulting, sending its shares tumbling more than seven per cent.

Chief executive Leo Apotheker, who took the helm in September, blamed the division's "missed opportunities" under his predecessor Mark Hurd.

He vowed to revamp the division to focus on consulting, cloud computing and higher-margin businesses, moving away from less-profitable endeavors like maintenance.

HP also trimmed its sales forecast for the second straight quarter, sending its shares to their lowest level since June 2009, wiping out about $7bn (£4.3bn) in market value.

The latest revision, the second since Apotheker took over seven months ago, raised questions about the former SAP CEO's ability to spark growth at the technology behemoth.

Several Wall Street investment houses, including Credit Suisse and Barclays, responded to the results by lowering their recommendations or price targets on the stock.

The expansion in services comes as the global PC industry is under siege from the growing popularity of mobile devices such as Appl's iPad.

Investors will get more insight on the weakening demand for PCs when rival Dell Inc reports after the bell.

HP's sales of PCs and other devices slid five per cent in the second quarter to $9.4bn. Consumer PC sales in particular dived 20 per cent - greater than the company anticipated.

"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."