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 user 2008-05-22 at 3:01:35 pm Views: 34
  • #20011

    HP’s US sales ‘not all bad, not all good,’ says CEO
    HP’s global sales offset flat U.S. ones
    High tech – The boost might not be enough as Hewlett-Packard prepares to digest EDS
    May , 2008 Hewlett-Packard Co. cashed in on rising international demand in its second quarter, but that performance may not be enough to ease worries about HP’s exposure to the ailing U.S. economy as it prepares to digest the second largest acquisition in its 69-year history.The results released Tuesday came as no surprise because HP provided a snapshot of its latest quarterly numbers and outlook last week when the Palo Alto, Calif.-based company jolted investors with the news it would buy technology services provider Electronic Data Systems Corp. for $13.2 billion.The deal has raised concerns that Plano, Texas-based EDS will compound the headaches that HP may be facing if U.S. demand for its personal computers, printers and other products and services remains flat or slumps as consumers struggle with high gas and food costs.Among other challenges, HP probably will have to make substantial layoffs from a combined work force of 210,000 employees while trying to blend two corporate cultures after the EDS deal closes late this year.

    Layoffs in NW expected
    In the Northwest, HP has big campuses related to its printer business in Corvallis, Vancouver and Boise, and it recently told employees it would cut back its printer operations at all three. Workers expect hundreds of job cuts, but the company hasn’t provided details.HP is counting on EDS to boost the demand for its services and computers among major companies and government agencies while improving its competitive position against IBM Corp., the leading seller of technology services.EDS also has Oregon ties, by way of its $420 million purchase last fall of Saber Corp. The software company, operating as an EDS subsidiary from its Portland headquarters, contracts with state governments for software that helps run a wide variety of state services, including vehicle registration, driver’s licenses, voter registration and unemployment services.Echoing remarks from a week ago, Chief Executive Officer Mark Hurd, assured reporters Tuesday that the acquisition will pay off.”Make no mistake about it: We will get the cost right and we will create value for shareholders,” he said during a conference call. In a separate call with analysts, Hurd acknowledged the difficulty facing HP in the United States, where the company’s second-quarter sales were unchanged from a year ago.”The best thing that I can tell you about the U.S. is that it’s a very spotty market, and we try to maintain caution around it.”

    Diversity saves revenue
    Like several other large technology companies, HP’s international diversity is helping to offset the debilitating effects of the weak U.S. economy. Markets outside the United States accounted for 70 percent of HP’s revenue in the second quarter.The strong international demand, fueled in part by the weak U.S. dollar, propelled an 11 percent increase in HP’s second-quarter revenue, which totaled $28.3 billion. If currencies had remained stable, HP said its revenue would have been up by 5 percent.HP fared particularly well in the rapidly growing economies of China, India, Russia and Brazil, where its sales climbed 26 percent from last year.The company also was helped by strong worldwide sales of notebook computers, which climbed 31 percent from last year. Sales of desktop computers remained flat, a trend that Hurd attributed to rising consumer demand for more portable devices that can access the Internet over wireless networks.In the quarter ended April 30, HP earned $2.06 billion, or 80 cents a share, a 16 percent increase from $1.76 billion, or 65 cents, in the year-ago period.HP also reiterated the improved outlook it gave a week ago. But the solid second-quarter performance and upbeat forecast for the rest of the year haven’t been enough to fully restore the erosion in HP’s stock price since news of the EDS deal leaked out. HP shares are down about 6 percent since then.In Tuesday’s trading, HP fell 25 cents to $46.46, then shed another 31 cents, or 0.7 percent, in extended trading.