HP pulls back 2003 outlook

Sail-trimming

Hewlett Packard Co disappointed the audience at its securities analysts yesterday when it failed to raise its first quarter forecasts yesterday and trimmed revenue estimates for its full year.

At the same time, the company told the conference in San Francisco that it was accelerating its efforts to wring every last drop of cost benefit out its takeover of Compaq and expected to achieve its stated merger synergies ahead of schedule.

Chairman and CEO Carly Fiorina told the audience that the firm had already achieved $2.4bn of annualized savings as a result of the deal, and was on track to hit $3bn by the end of its 2003 fiscal year. This means it will achieve its total planned savings a year earlier than originally expected.

However, Fiorina then delivered the bad news. Referring to reports that the Palo Alto, California-based company was set to raise its first quarter forecast, Fiorina declared, "I'm not here to raise guidance." She said the economy was still uncertain, and the firm wanted to make sure "we don't get ahead of ourselves." The firm said it remains comfortable with analysts' current first quarter forecasts which are for earnings of $0.27 per share on sales of $18.4bn.

HP expected IT spending to grow 2% to 4% in fiscal 2003, she said, and its revenue would grow in line with that. The revenue outlook represented a tempering of the company's earlier forecast, made at its June securities analysts meeting, that revenues would grow 4% to 6% and that it would grow faster than the market. CFO Bob Wayman later added that once the tech economy improves, it expects to see 7% to 9% top line growth.

In the meantime, said Fiorina, it was "prudent" for HP to accelerate its merger cost savings. She added that the firm's profitability was in its own hands, however the industry as a whole fared.

The company was now well positioned to go on the offensive she said, and the cost savings meant it could engage in targeted price cutting against its rivals, without compromising its profitability targets. PCs and industry standard servers were areas where the company had already taken action, said Fiorina. These are also areas where it feels the most heat from arch rival Dell Computer.

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