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HP Rolls Back Its 2003 Guidance

HP Rolls Back Its 2003 Guidance

HP says it should be able to manage revenue growth of 2%-4% next year, which is not the 4%-6% it's been talking about lately or the 5%-7% it was throwing around in June, numbers that nobody apparently believed, certainly not the Wall Streeters who figured, and still figure, that the best it can do is maybe a bit above 1%. HP is also predicting long-term secular growth of 7%-9%.

HP trotted the latest expectation, which it blamed on the spending environment, out at its analyst meeting in San Francisco this week when it also said that it would realize $3 billion in merger cost savings in fiscal 2003, which ends next October, a year ahead of time. It told the gathered throng that it was already 80% of the way there, achieving $2.4 billion in annualized savings.

It got there by offering up 12,500 people as living sacrifices, 2,500 more than it said it would fire, and by the end of fiscal .03 the total is now supposed to be 17,900. The savings from redundancies is supposed to equal $1.5 billion.

Credit Suisse made the observation that HP probably had to get to the magic $3 billion number ahead of the $2.5 billion it recently guided folks to "to maintain consensus EPS," which is in the range of $1.12-$1.33. Merrill Lynch believes the cost savings will actually exceed management's projects.

HP continues to promise that its PC unit - and the Thanksgiving Day weekend was supposedly pretty good for PCs, but then the shopping season is short this year - will return to profitability at the end of the first half. Although the revenues of its enterprise systems are in doubt, that unit is now supposed to be profitable for 2003. Meanwhile, HP figures it can wrest additional profitability from printers, currently the source of all its profits. Rather than 11%-13%, it's hiked the forecast up two points.

HP also moved some of the furniture around, changing the jobs of Mike Winkler, who's been functioning as executive VP, Global Business Unit, Jeff Clarke, the former Compaq CFO who's been a key part of merger integration team, and Clarke's HP integration counterpart Webb McKinney.

Winkler, a Compaq inheritance, gets to be chief marketing officer, responsible for the brand, communications, global alliances and the total customer experience teams. Business group marketing VPs will report to both Winkler and their business units. (Hmm, messy.)

Clarke will pick up a newly created role as executive VP, supply chain and customer operations, pretty much Winkler's old job, one gathers. He gets to manage HP's $30 billion in direct and $10 billion in indirect material sourcing.

McKinney role, previously shared with Clarke, becomes a one-man affair. He's now responsible for merger integration and organizational effectiveness, strategic change management and company governance.

HP has also given former Compaq CTO Shane Robinson, now HP's chief technology and strategy officer, responsibility for HP Labs, which will continue to be managed day-to-day by senior VP, research Dick Lampman.

HP is unlikely to do any big acquisitions, but may do smaller deals in software and services. HP's software strategy these days revolves around Openview, which it says is used by 100% of the Fortune 50.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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