HP Says It Can Improve Profit by 20% in 2004

Hewlett-Packard Co. said Tuesday that it could sustain profit growth of more than 20% a year in 2004 and beyond even as it fights IBM Corp. and Dell Inc. for sales of computers, printers, services and other products.

Chief Executive Carly Fiorina told analysts she saw the potential for growth around the world as corporations boost spending next year. She also said HP could do more to cut costs.

“Clearly we believe that the economy is improving,” Fiorina said.

Fiorina backed Wall Street’s estimates for its fiscal 2004 profit of $1.43 a share on revenue of $77.6 billion. Analysts expect fiscal 2005 earnings to rise 13% from 2004 estimates to $1.62 a share, according to a consensus of 13 analysts compiled by Reuters Research.

Fiorina brushed off the notion that the Palo Alto-based company was losing ground to IBM and Dell.

“I know it’s popular these days to describe HP as stuck between IBM and Dell,” she said. “But unfortunately the facts don’t support the thesis.”

She noted that the company holds a No. 1 or No. 2 position in areas such as storage, servers and printers.

Independent industry analyst Walter Winnitzki said he was not convinced. He pointed out that Dell has proved itself as a low-cost provider and that IBM has a strong position as a seller of services and hardware.

Fiorina also said the firm had been working since June to reorganize its sales force so it could sell computers and services as a package, a strategy that IBM has employed for years.

Fiorina said she did not expect a bonanza of year-end business spending, which sometimes occurs when corporate buyers have “use it or lose it” budget plans.

But she said she expected information technology budgets to grow 1% to 2% in 2004.

HP’s own spending on technology will be flat, she added.

HP also announced it had won more than $1 billion in service contracts from customers. The largest awards include a $135-million, 15-year contract from Romanian National Health Insurance House and a $115-million contract from Australia’s Amcor Ltd., the top plastics maker.

HP shares fell 52 cents to $21.96 on Tuesday on the New York Stock Exchange.