Moody's cuts HP long-term debt rating to Baa1
NEW YORK (AP) — Moody's Investors Service on Wednesday lowered its long-term credit rating on Hewlett-Packard, saying the technology giant will have trouble increasing sales of many of its products.
Moody's lowered HP's senior unsecured credit rating by one notch, to "Baa1" from "A3." The rating remains investment grade but Moody's said its outlook is negative, implying it could be further downgraded.
HP's finances will remain weaker than previously expected "over the immediate term," Moody's senior vice president Richard Lane said in the rating announcement.
About 75 percent of HP's revenue comes from personal computers, enterprise servers, printers and services, Lane noted. He said those offerings "face slow to no growth prospects over the coming years."
It's not certain whether HP can restore growth and profitability, Lane said.
Moody's expects the company's revenue will likely decline 5 percent next year and its profit margin will narrow. It sees free cash flow after dividends next year of about $4 billion, down from an earlier estimate of $6 billion to $7 billion.
The rating downgrade affects about $25 billion of HP bonds. A spokesman for HP, which is based in Palo Alto, Calif., said the company had no immediate comment on the Moody's report.
Moody's began its review of HP's rating in October. HP has been falling out of favor on Wall Street as its personal computer and printer businesses face increasing competition from tablet computers and smartphones.
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