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HP's credit rating gets dashed by Moody's

28 Nov 2012
An HP logo

Moody's has cut its credit rating for HP, dealing another body blow to the embattled tech giant. It is likely to face a tougher time raising capital in future.

Moody's downgraded HP's credit rating to Baa1 over concerns about its future ability to repay debts. Moody's downgrade follows a number of bad news headlines for HP.

"Although HP will maintain strong to leading positions in a number of product areas, the company's credit profile will remain weaker than previously expected over the intermediate term," said Moody's senior vice president Richard Lane.

HP's credit downgrading means the firm may have a harder time borrowing financing for its operations. A Baa1 rating is not a bottom-of-the-barrel rating but HP may have to incur higher costs next time it goes out to borrow.

Moody's said that the downgrade comes following concerns that HP's core businesses will see little to no growth in the intermediate term.

"Company-specific execution challenges in services and software, secular shifts in PCs and printing, competitive pressures throughout its broad portfolio, as well as a cautious demand environment [have lead to the downgrade]," continued Lane.

HP has endured a rough ride of late. It made sweeping cuts to a variety of divisions earlier this year. HP also wrote down $8.8bn of its acquisition of enterprise search firm Autonomy last week.

According to principal analyst for the Enderle Group Rob Enderle, HP needs to find a way to stabilise the company before it can have any chance of getting through the currently difficult times.

"What they got to do is stop the bad news coming and get to tell a positive story. They've just been pummelled," Enderle said to V3.

"By the time things start stabilising another event happens and it keeps them off balance and a company just can't continue to perform if they are continually off balance. At some point this stuff has to stop."

Enderle added HP should learn from its previous swinging-door policy for chief executives and keep chief executive Meg Whitman in charge to right the ship.

"One lesson you've had from HP is that constantly cycling chief executives across the board is not working. They absolutely have to keep some level of stability at the top or they just can't execute."

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James Dohnert
About

James is a freelance writer and editor. In addition to ClickZ, his work has appeared in publications like V3, The Commonwealth Club, CachedTech.com, and Shonen Jump magazine. He studied Journalism at Weber State University.

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