S&P downgrades Hewlett-Packard's credit rating


Standard & Poor's cut Hewlett-Packard's (NYSE: HPQ) credit rating on Wednesday, worried that increasing debt, management turnover and "major strategic reversals" had made the company a more risky bet.

One of the biggest issues cited was HP's acquisition of British software company Autonomy, for which it paid $11.7 billion; it used $6 billion of its cash reserves for the deal and also took a $1 billion charge when it decided to abandon its tablet computer business. Together, the moves dug deep into HP's free cash reserves and significantly increased its debt.

S&P is now rating the company's corporate credit and senior unsecured ratings BBB+, down from an A rating. The ratings company also dropped HP's short term rating from A-1 to A-2.

"We have concerns that HP's inconsistent growth strategies and high levels of board of director and senior management turnover have elevated the level of operational and execution risk in the near term," Martha Toll-Reed, an analyst at New York-based S&P, said in the report. Nevertheless, the company said the outlook on HP's rating is stable.

HP in September hired Meg Whitman to replace fired Leo Apotheker as CEO; she was the eighth chief executive of the company since 1999.

Her decision to keep the company's $41 billion personal computer business, which Apotheker in August had decided to jettison, drew criticism from a number of quarters. At the time, it also prompted Moody's Investors Service to place HP's long-term debt on review for a possible downgrade.

For more:
- see this Bloomberg article

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