Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: kemble s. matter who wrote (172830)	5/21/2003 2:12:20 PM
From: William F. Wager, Jr.	Read Replies (1) \| Respond to of 176387

kemble Hi...Carly Party... It took a long time, but Hewlett-Packard is finally getting some respect from investors. Now's the hard part. Hewlett-Packard topped expectations for revenue and earnings for its fiscal second quarter. Arch-nemesis Dell Computer only met expectations. After the close Tuesday, H-P reported $18 billion in revenue, about $300 million over expectations. H-P earned 29 cents a share in what it was readily cautioning was "non-GAAP" earnings per share, two cents more than expected. What makes that number "non"? All of the restructuring charges from the Hewlett merger with Compaq. And that's the thing to worry about. Back at $12 a share, compared with today's $17.05, investors could sit confidently, especially as they looked ahead to the several quarters in which H-P could milk the cost savings from the merger. H-P deserves credit for saving more than anticipated. But at its current price, the stock is trading at the top of the range of its recent valuation. Now, as the benefit of cost savings wanes, H-P must perform well against Dell in computers and IBM in services, a much tougher task. The company had a strong quarter but also benefited from previously reduced expectations after a weaker first quarter. The company posted a solid quarter for servers and storage, almost breaking even. Cash flow from operations was good. Operating margins in printers, the gem of its business, held up strongly. But operating margins were down for the services division, as it competed on price. As happened for most tech companies, the weaker dollar helped H-P. The currency impact was better than expected, adding 2% sequentially to revenue. While economists can get excited about this kind of gain, investors should temper their enthusiasm. The gain has more to do with Snow falling in the month of May than it does with management skill. Beating the number for the first half and then guiding so that it will meet analysts' expectations for the second half could be read as a subtle way of bringing down expectations for the year. It could hobble the legs of the tech recovery. Things start to get tougher for H-P. Send questions or comments to tape@wsj.com and check Mondays for selected letters in Tape Exchange at wsj.com/tape Updated May 21, 2003