August 27, 2002 5:42 PM PDT

HP works to reverse its PC slide

Hewlett-Packard's slice of the PC market has eroded since its acquisition of Compaq Computer, a trend the computing giant intends to reverse in the coming fiscal year.

Chief Financial Officer Bob Wayman said in an interview that the company intends to at least maintain its current market share as it looks to return its PC business to profitability within the next nine months.

"Certainly it is our assumption that we will not lose further share," Wayman said shortly after the company reported its first financial results incorporating the Compaq acquisition.

Dell Computer has been nipping at HP's heels since the merger was completed.

In the second quarter--which covers the final weeks leading up to the merger as well as the first weeks of the combined company--HP's trend of losing share to Dell accelerated, with HP very nearly ceding the top spot to its direct-selling rival, market researchers say. HP held 15.5 percent of the worldwide market in the second quarter, while Dell held 14.9 percent, according to Gartner.

"I think it's going to be a close call next quarter," Gartner analyst Charles Smulders said last month in regard to the Dell-HP struggle. A year ago HP and Compaq held a combined 18.3 percent share, according to Gartner.

However, HP is beginning to see success with taking more of its business direct, a move that should boost profitability as well as market share, Wayman said. Another key to profitability is lowering component costs, he said.

Although HP has pledged to return the PC business to profitability by the April quarter, the company has not said when its server and storage business might regain profitability.

"It's going to take a little longer," Wayman said. "It's the most complex of all of our businesses."

Although the business has some of the best prospects for long-term cost savings, it is also a business that is particularly hard hit by a global downturn in IT spending, Wayman said.

The services business is also hurting as companies cut back on projects that require hefty consulting work, but Wayman said he expects the company to return to modest revenue gains after seeing sales decline in the July quarter.

"We expect to see some growth in that business" even in the weak economy, Wayman said.

 

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