HP Leery of Uptick Talk

After posting mixed results in storage, CEO Fiorina predicts slow growth in IT spending

February 21, 2004

2 Min Read
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Put Hewlett-Packard Co. (NYSE: HPQ) CEO Carly Fiorina on the cautious side of the debate over how much IT spending will pick up this year.

Fiorina painted the gloomiest picture to come yet this year among storage executives when she forecast a paltry 1 percent to 2 percent growth in IT spending over the next quarter. Thats about one-quarter to one-half of what other technology companies have been forecasting.

“If the economy continues to improve, is 4 percent possible? Yes,” Fiorina said in a call with analysts after HP announced its earnings report Thursday night. “I honestly think 2 percent is probably more like it than 1 percent at this point. But we know that customers have gotten more discriminating about how they spend their money, and how fast they spend their money. And I just think that’s going to continue for a while.”

Fiorina’s caution was surprising after she made comments in December hinting at strong revenue growth (see HP's Hot on Storage).

Although Fiorina didn’t discuss storage growth specifically Thursday, HP’s storage products appear headed in two directions. Enterprise Virtual Array (EVA) SAN sales grew 112 percent overall from the previous year, with midrange and high-end storage up 14 percent. That marked the second straight overall strong quarter for HP’s disk arrays (see HP Midrange Storage Impresses). However, a 5 percent decline in tape sales dragged overall storage to a 2 percent decrease year-over-year. A major reason for tape declines? HP got out of the OEM tape library business.Because it pre-announced earnings last week, there were no surprises in HP’s overall numbers on Thursday. The company had income of $1.4 billion for $0.35 per share, up 21 percent from the previous year. Its $19.5 billion in revenue represented a 9 percent increase from the previous year (see HP Forecasts $19.5B in Sales).

When companies began reporting earnings in January, optimism was in the air. Executives from EMC Corp. (NYSE: EMC), Veritas Software Corp. (Nasdaq: VRTS, Storage Technology Corp. (StorageTek) (NYSE: STK), and Computer Associates International Inc. (CA) (NYSE: CA)said they sensed an IT spending uptick this year (see Storage Bigs Brash on Budgets). That has been tempered lately by a more cautious tone.

Advanced Digital Information Corp. (Nasdaq: ADIC) CEO Peter van Oppen forecasted two flat quarters before a pickup later in the year. Even after Network Appliance Inc. (Nasdaq: NTAP) announced a strong quarter this year, its president Tom Mendoza warned against expectations of wild spending.

“What’s going on now is the enterprise has a big problem that they need to solve a different way, meaning they don’t have the money they used to have,” Mendoza said. “If you go back to when the depression happened in the 20s, when people got money after that, they didn’t go back to being stupid.”

— Dave Raffo, Senior Editor, Byte and Switch0

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