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(Reuters) –
Hewlett-Packard Co trimmed its 2011 revenue projections on weak consumer
PC demand and a lackluster showing from its IT services arm, sending
its shares plummeting 12 percent.

The weak performance, which saw
HP missing its own revenue target for the fiscal first quarter, made
for a tough start for new Chief Executive Leo Apotheker.

January quarter was the first for the former SAP CEO, who joined the
company after the controversial ouster of the Mark Hurd and has since
put his own stamp on the company. HP added five new directors to its
board in a major shake-up just last month.

from its personal systems group slipped 1 percent as the company’s
personal computer sales in China continued to struggle. Revenue from its
giant services business slid 2 percent, as HP saw a shortfall in
short-term, "add-on" deals in areas such as infrastructure technology

"If you use Q1 as a
marker, it’s clear that we do a lot of things well at HP. It’s also
clear that we have isolated areas we need to improve," Apotheker told
reporters on a conference call.

poor showing overshadowed a beat on fiscal first-quarter profit, driven
in part by cost discipline and lower component costs that had also
boosted rival Dell Inc.

HP’s bright
spots included strong sales of enterprise servers, storage and
networking equipment, and a good performance in the printing group.

net of it was you had a miss on the PC side, and that’s clearly not
bouncing back," said Cross Research analyst Shannon Cross. "People are
worried about the ability of HP to show strong growth."

margin came in at 24.4 percent, just above Wall Street’s forecast. But
HP warned that lower component prices would not benefit it as much this

"If it’s all from
component prices they won’t get any credit," said Wedbush Securities
analyst Kaushik Roy. "The question is — are gross margins getting
better partly because better supply chain and mix shift to higher margin
businesses like networking, storage and servers?"

The world’s largest technology corporation by revenue raised its forecast for fiscal 2011 non-GAAP earnings,
predicting a profit of $5.20 to $5.28 a share. But it trimmed its
revenue outlook to a range of $130 billion to $131.5 billion, from a
previous $132 billion to $133.5 billion.

The lower sales outlook was due to weak demand for consumer PCs, and slower-than-normal growth in HP services.

emphasized that its forecast — which was also below analysts’
expectations for the current April quarter on a revenue basis — was