HP on Review for Possible Moody’s Downgrade

By Aaron Ricadela and Greg Chang - Oct 29, 2011 3:43 AM GMT+0700

Hewlett-Packard Co. (HPQ) had its credit ratings placed on review for possible downgrade by Moody’s Investors Service after the company decided to keep its personal computer business.

Moody’s, which rates Hewlett-Packard’s long-term debt A2, said it will focus on the implications for the company’s capital structure and liquidity profile of plans under new Chief Executive Officer Meg Whitman. The review affects about $24 billion of debt.

“HP maintains a solid liquidity profile,” although the company used almost $6 billion of its $13 billion in cash as of July to fund the $10.3 billion acquisition of software company Autonomy Corp., Moody’s said today in a statement. The ratings service is also looking at how much it will cost to reinvigorate Hewlett-Packard’s technology-services unit.

The possibility of a downgrade adds to the list of issues Chief Executive Officer Meg Whitman and Executive Chairman Ray Lane are tackling as the Palo Alto, California-based company prepares for its year-end earnings report on Nov. 21. The company said yesterday it would keep its $41 billion PC business in house after former CEO Leo Apotheker said in August he would explore a sale or spinoff.

Future Decisions

The company now needs to decide the fate of the WebOS software unit gained in last year’s acquisition of Palm Inc., and integrate the acquisition of Autonomy, Whitman and Lane said yesterday.

Hewlett-Packard rose 3.5 percent to $27.94 at the close in New York. The shares have declined 34 percent this year

Michael Thacker, spokesman for Hewlett-Packard, declined to comment on Moody’s statement.

Separately, Fitch Ratings said today Hewlett-Packard’s decision to retain the personal systems group “greatly” reduced the risk of a “two-notch downgrade” in its credit rating, though a lowering by a single grade is still possible.

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net Greg Chang at gchang1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net