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HP makes its case to analysts

Hewlett-Packard CEO Carly Fiorina makes the pitch to analysts that her company has made the right bets as the tech industry enters a period of slower growth.

Hewlett-Packard CEO Carly Fiorina made the pitch to analysts Tuesday that her company has made the right bets as the technology industry enters a period of slower growth.

Fiorina cited a Goldman Sachs study that showed that more than half of technology managers won't even spend all of their constrained budgets this year. And Fiorina wasn't too optimistic for next year, either.

"There is commentary (that) there will be nominal growth in 2003," Fiorina told analysts gathered at a meeting in Santa Barbara, Calif. "Personally, we are planning on low single-digit growth."

Given that environment, Fiorina argued that HP's controversial acquisition of Compaq Computer was the right bet, especially considering the cost-conscious environment that is likely to persist even as technology spending eventually rebounds.

Much of Fiorina's talk focused on cost-cutting, a major focus of the merger. Fiorina repeated HP's plans to save $500 million in costs this year, $2.5 billion next year, and $3 billion by 2004, by saving money on components, cutting back on real estate and internal IT spending, and through job cuts.

"Clearly, getting a world-class cost structure in place is vital to our...success," she said.

Echoing a familiar tone, Fiorina talked of HP's belief that companies will continue to have a fragmented infrastructure made up of different types of computers running multiple operating systems.

Fiorina also talked about focusing research in key areas like security, multimedia, services and grid computing, while scaling back in other areas.

"You will continue to see us investing less and less on component-level innovation," she said. "Intel is an obvious example, but Canon as our engine provider in our laser printer business is another example."

Fiorina said that the company has had a tough few months of integration work, but said the company is looking to gain or hold market share.

"We are on track to meet our profit targets, both for the company as a whole and for the enterprise systems group and personal systems" group, Fiorina told analysts.