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HP warns of lower earnings amid shake-up

Hewlett-Packard lowers expectations for quarterly revenues and announces a reorganization of several high-level executives.

Hewlett-Packard dampened expectations for quarterly revenues today and announced a reorganization of several high-level executives.

In a conference call today, HP chief executive Carleton Fiorina said the company would come in at the low end of its earlier estimate of revenue growth between 10 and 13 percent, but it still "has a shot" at meeting analysts' expectations. Analysts had expected earnings of 99 cents per share.

HP stock has been rising steadily with the company's "e-services" initiative to tie revenues to Internet commerce, but it slipped more than 4 percent in morning trading today. HP's stock, however, has dipped in recent weeks at the same time one of its chief competitors, Sun Microsystems, has risen.

Fiorina blamed the revenue droop on poor North American sales of PCs and servers, but she said HP has fired poor-performing sales people, will begin a new employee pay program to improve the situation, and that the Taiwan earthquake has delayed components needed to build PCs.

"Our North American sales organization continues to underperform. This is not news. It's a long-standing problem," she said.

Overall, though, she said, "A lot more is going right here than not." HP will begin trying to strengthen its brand name in November and will debut a new advertising campaign in December, Fiorina said.

In addition, she said the company is taking advantage of the slipping stock price by buying back lots of its own stock.

Reorganizing
HP's upper managers are rearranging duties to reduce redundancy and internal competition, Fiorina said. "It's not a huge overhaul, but it's an important change," she said. Financial benefits from the changes should appear in the company's fiscal year 2000, which begins November 1.

Duane Zizner, who had been in charge of Intel-based PCs and low-end storage devices, will take over the more powerful Unix servers and high-end storage systems as well. Bill Russell, who still will control those higher-end systems, will report to Ziztner instead of Ann Livermore.

Livermore, for her part, will lose control of HP's high-end computer systems but take over HP's biggest corporate accounts. She also will continue to lead the e-services drive, which has already resulted in 35 partnerships with different companies.

"She'll drive the strategy, make the deals, and call the plays," Fiorina said. Livermore also will be in charge of HP's services, financing, and consulting activities.

Carolyn Ticknor, who had been in charge of laser printers and scanners, will be in charge of all of HP's printers. Ticknor will hand off control over scanners to Antonio Perez, who in turn will give up control over inkjet printers to Ticknor.

Merrill Lynch trimmed its estimate by 2 cents and said it expected revenue growth of 10 percent instead of 12 percent. "Carly has a lot on her plate, including the Agilent spin-off and sales force reorganization, but appears to be making positive changes," Merrill Lynch analyst Steve Milunovich said in a report today.