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Moody's cuts HP's credit rating amid competition concerns

Losing faith in the board
Thu Nov 29 2012, 14:16
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MAKER OF EXPENSIVE PRINTER INK HP has seen its credit rating cut by Moody's with the agency expressing concerns that it can compete with its rivals.

HP's turbulent 2012 continued as the firm saw its credit rating drop following its multi-billion dollar writedown of Autonomy and successive quarters of massive losses. Ratings agency Moody's cut HP's credit rating from A3 to Baa1, which is three steps above 'junk' status.

Moody's expressed concern over whether the company can compete against its rivals. Richard Lane, SVP at Moody's said, "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."

Moody's ratings cut comes after a damaging year for HP. The firm has been involved in a bitter and damaging battle with Oracle over Itanium, and while HP won, documents surfaced during the trial that did little to paint HP in a good light. However it is HP's two multi-billion dollar writedowns of EDS and Autonomy that have caused serious concerns to be raised about the firm's governance.

As HP's credit rating falls, the company will find the price of borrowing cash going up. While HP is far from being in dire straits financially, the rating cut is a clear sign that the markets are losing confidence in the firm, leaving CEO Meg Whitman with a lot of work to do in order to turn around this perception. µ

 

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