HP Pledges Server, Storage Growth in Year Ahead

Despite ongoing concerns about the health of the PC market, Hewlett-Packard Co. is comfortable with its projections of revenue growth of between 15 percent and 17 percent in fiscal 2001, Carly Fiorina, HP's chairman, chief executive officer and president, said in a meeting with financial analysts this morning.

The growth will be driven by sales of HP's "Internet infrastructure" products, which include Unix servers, storage equipment and software products. Sales of those products began accelerating at the end of fiscal 2000, and will continue to grow in the coming year, particularly among U.S. businesses, Fiorina said.

HP badly missed earnings predictions for its fourth quarter of 2000, which ended Oct. 31, and Fiorina sought to reassure investors that the company's outlook is strong. The company has worked hard to overhaul its server and storage offerings during the year, and those investments are now beginning to pay off, she said.

As an incentive to boost profits, HP has adjusted the way it allocates bonuses, tying rewards to profit growth as well as revenue targets, she said. No HP executives will get their bonus for the second half of fiscal 2000, she said.

"There are no executive bonuses being paid -- starting with myself but not ending with myself -- in the second half of 2000," she told financial analysts. "We are very serious about balancing top line growth with bottom line profitability."

PC sales will increase in single digits only compared with fiscal 2000, but HP had allowed for that when it put together its financial forecast, she said.

HP expects consumer PC sales to grow by about 18 percent in 2001, driven by sales outside the U.S. That's down from growth of 75 percent in HP's fiscal year 2000. HP's consumer PC business accounts for about 10 percent of its total sales.

Business PC sales will grow about 5 percent in fiscal 2001, compared with a decline of about 2 percent in sales the previous year, Fiorina said.

HP sees the Unix server business as a "two-horse" race between HP and Sun Microsystems Inc., she said.

"In the Unix space we think we are in a position to seriously challenge Sun for the first time, and we believe we're pulling away from IBM (Corp.) and Compaq (Computer Corp.)," Fiorina said.

The coming year should also see an uptick in HP's printer sales, she said. The company expects to have its "biggest product introduction year ever" in laser printers in 2001, Fiorina said. The company's imaging and printer business grew 10 percent in fiscal 2000 to pass US$10 billion, and the company hopes to best that growth by 2 percentage points in 2001.

HP is comfortable with the consensus analyst estimate of 44 US cents per share profit for its current fiscal quarter, which will end Jan. 31, Fiorina said. That would be an improvement of 4 cents on the same period a year ago. The company also concurs with analysts predictions of a profit of US$1.98 per share for the year.

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