Kumar is looking for attention again with stupid remarks.
NW
Hewlett-Packard earnings may doom computer union
Nov 14, 2001 (The Dallas Morning News - Knight Ridder/Tribune News Service via
COMTEX) -- Hewlett-Packard Co.'s fourth-quarter earnings report on Wednesday,
which trumpeted a greater-than-expected profit, could actually work against the
company's efforts to persuade investors to approve its proposed merger with
Houston-based Compaq Computer Corp., analysts said.
The technology company based in Palo Alto, Calif., said its printer business was
much stronger than analysts had expected, while its technology services saw
steady demand.
But the weak point was its sales of personal computers, servers and storage
devices, which together dropped 31 percent from a year ago.
That detail will leave investors questioning whether Hewlett-Packard should
merge with a company that makes the very products it has the most trouble
selling, said Shebly Seyrafi, enterprise hardware analyst for A.G. Edwards.
"There's one school of thought that says that if H-P is reporting good results,
that means management is doing a good job, so maybe the merger will go through,"
Seyrafi said. "But the other school of thought, the one I believe, is that the
value of H-P is a lot larger on the printer side than on the computing side, so
merging with Compaq is going the wrong way."
However, Hewlett-Packard chief executive Carly Fiorina told analysts in a
Wednesday conference call that she still has confidence in the merger, which was
announced in September.
"We remain convinced this merger will occur," she said.
Hewlett-Packard said Wednesday it earned $97 million, or 5 cents a share, in the
fourth quarter. That's an 89 percent drop from last year's fourth-quarter
earnings of $922 million, or 45 cents a share.
Leaving out fourth-quarter charges not related to operating costs, including a
$282 million charge related to 6,000 job cuts, Hewlett-Packard earned $361
million, or 19 cents per share, on revenue of $10.9 billion, down from $13.3
billion a year ago.
Analysts had expected earnings of 8 cents a share on revenue of $9.9 billion,
according to a consensus compiled by Thomson Financial/First Call.
The earnings were announced before New York Stock Exchange trading opened
Wednesday. Both Hewlett-Packard and Compaq shares rose sharply as soon as
trading opened. Hewlett-Packard shares closed up $1.85 at $22.08, and Compaq
shares rose $1.20 to close at $10.
But Hewlett-Packard still has a long road ahead in its merger plans. The company
is expected to file its merger information with the government in the next few
days, with a shareholder vote on the deal to follow in the next few months.
The upcoming vote got much more complicated last week, when family members of
Hewlett-Packard co-founder William Hewlett, who died in January, said they would
vote against the deal. The family and a charitable foundation that Hewlett
established represent about 5 percent of the company's shares.
The charity foundation established by co-founder David Packard, who died in
1996, has not weighed in with its opinion. That foundation owns more than 10
percent of Hewlett-Packard's shares, so its decision is crucial, said Ashok
Kumar, an analyst at U.S. Bancorp Piper Jaffray.
"If the Packard Foundation votes against it, there's not a chance in hell the
deal will go through," he said.
A separate foundation run by Packard's son, David W. Packard, owns 1.3 percent
of Hewlett-Packard's shares. Packard, who has no control over the Packard
Foundation, said last week that he is against the merger.
Fiorina said Wednesday that she has been meeting with representatives of the
Packard Foundation and remains confident that shareholders will approve the
merger. The foundation probably won't decide how it will vote until next month
or January, she said.
If the merger falls through, Compaq, beleaguered by slow PC sales, would find
itself in a tough situation, Kumar said.
"I don't see how Compaq could survive if the merger doesn't go through," he
said.
---
By Crayton Harrison
The Dallas Morning News
CONTACT: Visit The Dallas Morning News on the World Wide Web at http:/
www.dallasnews.com/ |
