Fitch downgrades Hewlett-Packard by 1 notch
Fitch Ratings downgraded Hewlett-Packard Co. and its Electronic Data Systems subsidiary on Friday, saying it expects the company to struggle into next year due to the weak economy and an increase in debt from recent acquisitions and share repurchases.
The move came two days after Standard & Poor's cut HP ratings.
Fitch cut the ratings to "A'' from "A+." The move affected HP's default rating, senior credit facilities and senior unsecured debt and EDS' default rating and senior unsecured debt. EDS helps other companies handle their technology needs.
Fitch also assigned a "Negative" outlook to the ratings, implying the possibility of further downgrades.
The agency said that HP's financial results in the fiscal year that ended Oct. 31 were weaker than expected due to the economy, competition that hurt pricing, a decline in revenue from some high-profit work, and under-investment in the services business.
On Wednesday, Standard & Poor's cut HP to "BBB+" from "A," citing large stock buybacks and the recent $10 billion acquisition of business software maker Autonomy Corp. S&P rates the outlook as "Stable."
In its first earnings report since hiring former eBay Inc. leader Meg Whitman, HP on Nov. 21 said that fourth-quarter net income tumbled 91 percent on charges to drop tablet computer and smartphone lines. The company also offered a disappointing forecast for the next 12 months, blaming the debt crisis in Europe and weak spending by consumers and businesses.
On Friday, shares of Palo Alto, Calif.-based HP fell 54 cents to close at $27.68. Shares are down about 34 percent in the year to date.