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 user 2005-02-13 at 10:54:00 am Views: 78
  • #10225

    Change at HP may help some rivals, hurt

    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

    “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.

    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.


    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.

    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

    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.

    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.

    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