BREAKING NEWS
HP CEO: December sales 'like
someone turned the lights out'
by Clare Haney, IDG News Service\San Francisco Bureau
January 11, 2001, 16:54
Hewlett-Packard Co. saw demand for its products fall sharply last
month, causing the company to drastically alter its expectations both
for its first quarter due to close Jan. 31 and the following quarter
ending April 30, according to HP's chief.
"December was like someone turned the lights out," Carly Fiorina, HP's
chairman, chief executive officer and president, said during a
conference call Thursday to discuss the profit warning the company
issued earlier in the day. She noted hearing the same experience
recounted by other IT leaders last week at an economic forum in
Austin, Texas, hosted by U.S. President-Elect George Bush. "There
was a very sudden change entering the second half of December,"
Fiorina said.
Instead of first-quarter earnings per share in the order of $0.45, HP
Thursday downgraded its forecast to earnings per share of between
$0.35 and $0.40. The vendor predicted first-quarter revenue growth
to be in the low- to mid-single digits, with the company's second
quarter looking no better.
Showing how quickly the market is changing, Fiorina recalled how at a
Dec. 6 meeting with financial analysts, she had recommitted to HP's
predictions for fiscal 2001 even while other PC players issued profit
warnings. HP said at the time that its first-quarter results would be
relatively unaffected by the slowdown in U.S. retail PC sales because
of its global reach and wide product base.
Since that time, economic uncertainty has grown, leading to a
slowdown in both consumer and corporate sales of HP's products
across the board, according to Fiorina. The company has witnessed a
"deceleration of corporate IT spending plans," she added, but
stressed that HP hasn't seen order cancellations.
HP intends to "aggressively manage headcount" in order to help it deal
with the economic uncertainty, Fiorina said. She wouldn't indicate
whether any layoffs are planned, saying only that HP would discuss
headcount when it reports its first-quarter results on Feb. 15. HP
estimates around 15 percent of its staff are already "flexible
resources," indicating that they are on temporary contracts,
according to the company's chief financial officer, Bob Wayman. HP
has already been working hard to get its expenses in line and is
confident it will achieve that goal, Fiorina added.
Looking at first-quarter performance by geography, Fiorina said U.S.
sales were "weak across the board," while European sales were
relatively strong, on the consumer side in particular. HP is seeing
some slowdown of sales in Asia-Pacific compared with the "very high
(demand) rates of recent quarters," Fiorina said. That slowdown is
affecting both consumer and business sales, she said.
By product, sales of HP's offerings in the "always-on Internet
infrastructure" category, which includes servers and storage
products, were well below what the company had anticipated,
according to Fiorina. She wouldn't be drawn on the performance of
other products, citing the three-week period remaining before the
close of the first quarter.
Despite the profit warning, HP remains optimistic about the future. "I
believe you will see HP performing as it always has in turbulent times
-- solidly, credibly and confidently," Fiorina said. However, she added,
given the economic uncertainty and concerns that a recession may
be looming, "an abundance of caution is appropriate."
HP, based in Palo Alto, California, can be reached at
hp.com. |
