Hewlett-Packard's Shares Plunge After Forecast Misses Estimates

The outlook marred Leo Apotheker 's first quarter as chief executive officer and underscored two main challenges he'll face at HP. The company's reliance on home-computer shoppers, which generate 40 percent of PC revenue, has left HP vulnerable to a consumer slump, said Abhey Lamba , an analyst at ISI Group. The services unit, in the meantime, is looking for ways to better capitalize on a shift to cloud computing -- the notion of delivering applications over the Web.

"We have isolated areas we need to improve," Apotheker said while a conference call with analysts. Sales of PCs to consumers declined 12 percent in the first quarter, and total personal systems group revenue fell 1 percent to $10.4 billion.

Services revenue dropped 2 percent to $8.61 billion. Apotheker said that division had a "mixed performance" and that the company would seek more lucrative cloud-computing contracts.

To put HP on a new course, Apotheker and Chairman Ray Lane have shuffled the board and turned to acquisitions to expand in software. They're as well aiming to strengthen HP's hand in the burgeoning markets for smartphones and tablet computers.

The acquisition front

On the acquisition front, HP purchased business- intelligence software maker Vertica Feb. 14 for an undisclosed amount. That followed a decision to discontinue the company's own data-analysis program, called NeoView. Vertica's clients include Twitter Inc., Zynga Inc. and Groupon Inc.

Later this year, HP will introduce a TouchPad tablet computer based on the WebOS operating system, gained in last year's $1.2 billion acquisition of Palm Inc. The company introduced new smartphones running the software on Feb. 9.