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 user 2005-02-13 at 10:58:00 am Views: 76
  • #10226

    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.


    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

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

    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