May 13, 2002 4:20 PM PDT

Old HP bows out Tuesday with earnings

The old Hewlett-Packard will take one last bow Tuesday as the computing giant reports earnings that do not include contributions from Compaq Computer.

Although attention at HP is focused on its post-Compaq life, the company is reporting on Tuesday earnings for the three months ended April 30, just before the Compaq acquisition was made official on May 3. HP is expected to report earnings of 25 cents a share on revenue of about $11.1 billion.

HP may offer some forecast for how the combined company is likely to do in the current quarter, but it's expected to save most details of its outlook for an analyst meeting tentatively set for June 4 in Boston.

HP is also starting this week the process of cutting some 15,000 positions from the company. The shedding effort will take place over the next six to nine months, although it may take longer in some areas because of local laws. HP has offered voluntary early retirement to some 9,000 workers in the United States, although it is unclear how many of the job cuts will ultimately come from the voluntary program.

Several analysts have upgraded the stock in recent days, arguing that the price of HP shares already accounts for the risks of bringing together such large companies.

"We have been cautious on HP's stock for nearly two years, but the stock now presents compelling value," Toni Sacconaghi, an analyst at Wall Street brokerage Sanford C. Bernstein, wrote in a research note last week as he upgraded the stock. Prudential Securities analyst Kimberly Alexy also upped HP shares, saying that despite long-term concerns about HP's ability to take advantage of Compaq's assets, the stock is at an attractive price.

Aside from the guardedly optimistic comments on HP, the outlook for technology in general has been questioned. Even HP CEO Carly Fiorina herself said last week that "this is an industry that will be characterized by slowing growth going forward...The IT industry will never return to the heady days of 20, 30, 40 percent growth."

Fiorina's comments echoed similar comments from IBM executives. At the same time, Fiorina said that slower growth will fuel consolidation and HP is hoping to position itself as the best alternative to IBM, offering a more open approach on software.

Whereas IBM has chosen to take a vertical approach in its high-end systems, using its own processors, database software and other programs, the new HP will look to partner with Intel, Oracle, Microsoft and others, said HP President Michael Capellas, the former Compaq chief executive.

"It's a more open framework," Capellas said in an interview last week.

Peter Blackmore, the former Compaq executive charged with heading up HP's enterprise sales effort said that HP is stronger than IBM in servers and storage, although IBM benefits from strengths in services and manufacturing.

Although IBM has a broader array of services, Blackmore said HP can win business by bringing in partners such as Accenture and KPMG that can offer the kinds of business consulting that HP doesn't have.

"You don't have to do it all yourself," Blackmore said in an interview. "What you have to show is leadership."

Blackmore said that large companies are looking for a single global technology supplier and that HP is now in a position to fill that role. "There's only two to pick from," he said, adding later that "the EMCs, Dells and Suns have a much more limited portfolio."

 

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