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Fiorina: Upbeat economy puts H-P on track for 20% growth
By Jon Swartz, USA TODAY
Despite tepid tech spending, Hewlett-Packard (HPQ) expects profit to grow 20% next year because of a resurgent economy and consumer demand for PCs and printers.
H-P Chief Executive Carly Fiorina on Tuesday told financial analysts that H-P should meet Wall Street earnings estimates of $1.43 a share on revenue of $77.6 billion in 2004. "Clearly we believe the economy is improving," she said.

H-P's projected profit growth would double that of Microsoft (9%) and IBM (8%) but trail Dell (26%) for the same period, says Wall Street estimates tracked by market researcher Thomson First Call.

The growth prediction, on the heels of strong quarterly results last month, is the latest encouraging news from H-P since it acquired Compaq in tech's biggest deal last year. H-P so far has largely cut costs to boost profit.

The bullish forecast comes amid concern about H-P's inconsistent performance in recent quarters and that it is caught in a competitive vice between Dell's inexpensive PCs and IBM's high-end services.

"I know it's popular these days to describe H-P as stuck between IBM and Dell," Fiorina said. "But unfortunately the facts don't support the thesis."

During a wide-ranging presentation, H-P also discussed:

•Reorganization. To boost sales among large customers, H-P will revamp its sales force to sell computers and services under one organization -- a tactic IBM has successfully used for years.

"The intention is to combine two low-profit segments and have them drive each other's sales," says analyst Peter Kastner of Aberdeen Group. The change, expected next year, could also clarify for customers who they deal with at H-P.

•Acquisitions. H-P has targeted several small software companies to acquire next year for about $100 million. However, Fiorina said, H-P has no intention of buying a big services or consulting company, which has been rumored.

•Tech spending. Fiorina expects corporate budgets to grow in the low-single digits in 2004 after several flat years. But she doesn't expect much in year-end purchases by companies as they try to use up budgets. "I think most (chief information officers) and CEOs want to exit the year not spending what they don't need to spend."

Her projection that tech spending won't pick up until next year may have offset, to investors, H-P's bullish projections. H-P shares fell 2% Tuesday to $21.96; other major tech stocks also fell.

H-P also played up the fact that it recently landed service contracts worth more than $1 billion from entities including the U.S. Postal Service and Novell.