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Hewlett-Packard to Pricewaterhouse: "Never Mind"

After its stock was pasted by investors, H-P dropped its bid to acquire the business consultancy unit of PricewaterhouseCoopers.
November 14, 2000
The honeymoon is officially over for Hewlett-Packard Co.'s CEO Carly Fiorina.

Yesterday, H-P disclosed its third-quarter earnings, and it wasn't pretty. The computer and printer maker committed that most unforgivable of sins - failing to meet or exceed the earnings estimates of Wall Street analysts -- the first time that has happened since Fiorina took over as CEO n July 1999.

Partly as a result of its poor earnings report, H-P dropped its bid to acquire the business consultancy unit of PricewaterhouseCoopers. Fiorina proposed the acquisition as a way to propel the company into the lucrative information-technology consulting service business. It was her first major effort to move the company in a new strategic direction.

H-P attributed its earnings shortfall to a variety of problems, including unfavorable currency effects, higher-than-expected sales-commission costs, and high expenses related to aggressive hiring. It also said that took a $48 million write-off against its venture-financing portfolio and was aware that much of its sales is derived from low-margin products.

At any rate, Fiorina decided the price for buying PriceWaterhouseCoopers was too expensive and pulled the plug, but added that she remains interested in alternatives such as another acquisition or a strategic equity stake in existing consultancy firms.

In response to H-P's decision, Pricewaterhouse said it will "explore other options," such as seeking another buyer or investor or perhaps even spinning it off in an IPO. It remains to be seen what Wall Street thinks of that idea, however.

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