*NEWS*CHANGES @HP HELPS SOME &HURT OTHERS

[Anonymous]

Change at HP may help some rivals, hurt
others
NEW YORK, Feb 9  – The ouster of Hewlett-Packard Co.
Chief Executive Carly Fiorina could boost top PC maker Dell Inc. but hurt rivals
in the market for server computers and storage machines, analysts said.

Under Fiorina, HP lost the No.
1 position in the PC market to Dell, and analysts said HP is likely to lose more
market share to its archrival amid the uncertainty surrounding Fiorina’s
departure.

“I just think HP will
end up being less committed to the PC business somehow, or maybe they will focus
more on profit than on revenue growth, and that will make pricing better for
Dell,” said Mark Herskovitz, portfolio manager for the $2.2 billion Dreyfus
Premier Technology Growth Fund, former HP shareholders.

He noted that International Business Machines Corp.
recently agreed to sell its PC business to China’s Lenovo and said a new leader
at HP might consider following suit.

“This has
to be good news for Dell — because who’s left? IBM is out of the business,
basically,” Herskovitz added.

Dell
shares, up almost 1 percent in afternoon trade, have almost doubled in price
since Aug. 31, 2001, when HP hammered out a deal to merge with Compaq Computer.
HP’s stock has lost 13 percent since then.

HP is
trading at a significant discount to its rivals. Its price-to-earnings ratio of
13 puts it at the bottom of the 30 top technology companies that makes up the
American Stock Exchange Computer Technology Index. .XCI). Dell has a P/E of 32.

HP said
it does not plan to break the company up but will stick to the strategy of
providing a one-stop shop for computer and printer gear. But executives appeared
to leave the door open to a break-up, saying they were open-minded.

SERVERS
AND STORAGE

Analysts
said the change at HP could mean trouble for rivals in the market for server
computers and storage machines, such as IBM, Sun Microsystems and EMC Corp..

HP is
unlikely to relinquish its more profitable server business, they said. HP trails
IBM in the market of computer servers, which manage corporate systems, and is
ahead of Sun and Dell.

The new
HP CEO could also focus on reviving HP’s stagnating storage business, posing a
potential threat to EMC, analysts said.

“IBM, Sun
and EMC may lose market share because HP is going to change itself into
something more aggressive,” said Frank Dzubeck, president of Communications
Network Architects, a technology analysis firm in Washington.

IBM was
off $1.35, or 1.4 percent, to $92.78, dragging down the Dow Jones industrial
average. .DJI). EMC declined 20 cents, or 1.5 percent, to $13.01. Sun, which is
struggling to turn around its server business, fell 8 cents to $4.17.

Under
Fiorina, HP turned in erratic financial results. The board, announcing her
departure, said its major concern was not strategy, but execution.

“Competitors need to be worried that potentially the board can find
someone who is better than Carly on execution,” said Gartner analyst Carl
Claunch.

Analysts
expect the management transition at HP to give the company’s rivals an
opportunity to lure away its customers, given prospects for disruption and a
potential restructuring to redo some of Fiorina’s moves.

“Whenever
there is a change of some significance, it always presents an opportunity for
competitors to make inroads,” said John Patrick, president of Attitude L.L.C., a
consulting firm. “When a very visible leader departs, that always gives
customers a reason to pause and provides an opportunity for its competitors to
take advantage.”

HP shares
were up $1.39, or 7 percent, to $21.53 in afternoon trade after rising as much
as 10 percent earlier in the session.

“It
surprises me the HP stock is rising, because what this means is at least another
six to 12 months of uncertainty and turmoil in management of the company,” said
Barry Randall, manager of the First American Technology Fund, which recently
sold its HP stock

[Author]

February 13, 2005 at 10:54 AM