Hewlett-Packard warned of a worsening outlook for 2013 earnings on Wednesday, reflecting slow progress on CEO Meg Whitman's turnaround plan while technology spending sputters, sending its shares to a nine-year low.
HP, the largest U.S. technology company by revenue, forecast that its earnings will slide sharply next year, compared with Wall Street's expectations for flat profits.
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Whitman, at HP's annual presentation to investors, blamed unprecedented executive turnover in past years for dragging out the Silicon Valley company's turnaround. The company's shares plummeted as much as 7 percent.
She said it will take until fiscal 2014 for the company's recovery to start to become visible.
"The big disappointment is stemming from the fact that things are expected to get worse" in fiscal 2013, RBC Capital Markets analyst Amit Daryanani wrote.
"The company intends to revert back to being a growth story. However, in the near term, earnings will get more challenging before they get better."
HP gave a particularly gloomy outlook for enterprise services, which provides services to corporations and is one of the company's the largest divisions and a key component of Whitman's rescue plan.
Revenue from enterprise services will dive 11 to 13 percent in fiscal 2013 and be barely profitable, with operating margins of 0 to 3 percent, HP said.
The company forecast overall earnings, excluding restructuring charges and other items, at between $3.40 to $3.60 a share in fiscal 2013. That's well below the average forecast by Wall Street analyst of $4.18, according to Thomson Reuters I/B/E/S.
Whitman, who became HP's third CEO in as many years after taking the helm from an abruptly dismissed Leo Apotheker just over one year ago, is trying to revitalize the former industry icon via layoffs, cost cutting, and expansion into areas with longer-term potential such as enterprise computing services.
Longer term, "we expect to be a GDP-like growth company with key pockets of higher growth," Cathie Lesjak, HP's chief financial officer, said.
Apotheker's 11-month tenure was marked by an acceleration of departures from various divisions, such as networking chief Marius Haas, as he brought in former coworkers from SAP AG .
"My belief is that the single biggest challenge facing Hewlett-Packard has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices, and frankly some significant executional miscues," Whitman told investors at the conference in San Francisco.
"This is important because as a result it is going to take longer to right this ship than any of us would like," she added.
HP, like rival Dell Inc, is trying to transform itself into a major enterprise computing provider in the mold of IBM Corp, while slashing expenses to boost the bottom line.
The company is laying off 29,000 employees over the next two years and has written off $10.8 billion mostly related to the writedown of its EDS services business. Meantime, its business continues to be hit by a slowing in corporate spending and personal computer demand worldwide.
Whitman vowed to reduce the number of product offerings and to cut costs as HP tries to recover in a worsening macro-economic environment. She has said it will take five years for the turnaround to be effective.
"All of this is fixable but it is going to take some time," she said.
The company's recovery will start to become visible in fiscal 2014 with all of the current investments paying off, she said.
"FY 15 will be the year of acceleration," Whitman said. "Revenues should be growing faster than cost."
HP's stock was down 7.5 percent at $15.84 in midday trading.