Management Toolkit

HP still seeks competitive edge

Ina Fried CNET News.com

Published: 09 Dec 2003 15:10 GMT

Although Hewlett-Packard is finally getting settled into married life, some analysts say the company still needs to figure out what it wants to be when it grows up.

While the company has managed to shave considerable costs and return all its businesses to profitability after the Compaq Computer merger, analysts say it is still unclear whether the combined entity is any better positioned to compete against IBM or Dell.

"Our primary concern is our sense that HP is back where it was prior to its acquisition of Compaq: a great printer franchise with a suboptimal long-term outlook for the computer business," Bear Stearns analyst Andy Neff said in a research note last week. "Essentially, we’re looking for something that can convince us that HP can show consistent growth -- but we have concerns."

HP executives will try to address these issues on Tuesday in a meeting with financial analysts in New York. The company is likely to trot out the heads of each of its business units to talk about gains in PCs, services deals and high-end computer gear, such as servers and storage.

While concerns linger, analysts expect the company itself to be quite upbeat, since it's coming off a quarter in which all five of its business units posted profits. While chief executive Carly Fiorina was reserved in July when HP missed expectations, she said confidently in November that the company had hit its stride, posting sales considerably ahead of expectations.

In addition, there seems to be a sense that much of the hard work of bringing together HP and Compaq, which merged in 2002, has been done.

"The big blowups that people anticipated happening from the merger haven't happened," said Shannon Cross, a financial analyst for Cross Research.

HP will be looking to prove to the financial community that it has emerged from the merger a stronger company and that it is capable of growing its business as technology spending improves.

"We've done the heavy lifting," said HP spokesman Brian Humphries. "We've integrated the two companies. We've put a deliberate portfolio (of products) together. Wall Street is now looking to understand if we can continue the momentum of the fourth quarter."