HP To Beat 1Q Estimates, But Corporate Spending Still Sluggish

Hewlett-Packard

Fiorina, in an interview with CRN on Saturday, said consumer spending declines signaled the beginning of the current recession, and recent increases may well be the harbinger of a recovery.

"In the U.S., there is hope," she said. "Consumer technology spending was the first thing to fall off the cliff at the beginning of all this, and consumer technology seems to be better. The enterprise is a little bit more of a question. Businesses are clearly setting their budgets very conservatively. I think we will have a second-half recovery, but it will be muted. Our own planning calls for enterprise IT budgets to grow at only 2 [percent to 3 percent this year and get back to maybe 8 [percent to 10 percent in 2003."

The company's previous first-quarter guidance, provided last Nov. 14, was for revenue to be down slightly from the fourth quarter due to normal seasonal effects, with gross margins and expenses to be approximately flat with the fourth quarter.

Based on an uptick in consumer demand in both personal computers and imaging and printing solutions, HP said it now expects to report revenue that will be up moderately higher than the fourth quarter. Because of a continued focus on cost structure and expenses, HP said it now expects a measurable increase in gross margins with expenses approximately flat with fourth-quarter levels. As a result, HP expects to report earnings per share at a level substantially above current consensus analyst estimates of 16 cents.

But Fiorina cautioned that the global economy remains a question market. "The economic outlook continues to be a little cloudy to me," she said. "This is, as we all now know ,a global phenomenon. So, what you see even as there are glimmers of recovery in the U.S., the Asian markets continue to be weak. The Latin American markets continue to be weak. And that has to play out, because 64 percent of our revenue comes from outside the U.S."