Hewlett-Packard Co Chief Executive Officer Carly Fiorina, who was scheduled yesterday to provide the computer maker's last quarterly earnings report without Compaq Computer Corp, has to prove the acquisition will boost sales, investors said.
"She's got to hit the marks and everybody's going to be looking at them, because they've been in print enough times," said Bill Schaff, whose US$70 million Berger Information Technology Fund owns the stock. "I would not like to be in her shoes."
PHOTO: AP
Analysts expect a rise in fiscal second-quarter profit to US$0.25 a share and a US$500 million decline in sales to US$11.1 billion, according to the average estimates in a Thomson First Call survey. Hewlett-Packard will have costs of as much as US$1.4 billion from the purchase, and the company won't say whether any of the expenses were taken in the past three months.
Chief Financial Officer Bob Wayman said in an interview last week he may give some "basic" targets for the combined company, with full forecasts coming next month. The stock has dropped 14 percent since the acquisition was announced Sept. 3 and has fallen 24 percent in the past year.
"We know we have important execution challenges in front of us, but we are ready," Fiorina said at a press conference last week in Cupertino, California.
Fiorina closed the US$18.9 billion Compaq purchase May 3, after defeating an eight-month campaign against the transaction led by former director Walter Hewlett.
Palo Alto, California-based Hewlett-Packard surpassed analyst forecasts in the past two quarters, after disappointing in 2000 and last year. Investors credit Fiorina with energizing workers to overcome the distracting acquisition struggle.
"You've got to respect her willpower and her energy," said Bruce Garelick, an analyst with Loomis Sayles & Co, which manages US$60 billion and has been adding to its Hewlett-Packard stake. "They have some ammunition to get out of the blocks with a little bit of momentum."
Fiorina has said Compaq will help shore up sales of server computers and services and create a bigger rival to International Business Machines Corp (IBM). Net income in the year-ago quarter was US$0.16 a share on US$11.6 billion in sales.
Personal-computer sales fell for the first time in 15 years last year and then dropped 2.7 percent in the calendar first quarter, according to IDC. Sales of digital cameras and photo printers buoyed Hewlett-Packard's fiscal first-quarter results, and analysts said some of that strength continued in the recent period.
"H-P's consumer business held up better than expected throughout much of the April quarter," Prudential Securities Inc analyst Kimberly Alexy wrote in a note to clients last week.
Sales of business PCs and servers that run Web sites and networks haven't been as strong. Server shipments worldwide rose just 0.6 percent in the calendar first quarter, with Hewlett-Packard's shipments dropping 13 percent, according to Dataquest.
"These business segments could remain under pressure until we see signs of a sustainable recovery in corporate profits," Merrill Lynch analyst Steve Milunovich wrote last week.
That has raised concern that the economy won't rebound any time soon and that consumer spending will cave as the slump continues. There's no compelling reason for consumers to keep spending later this year, said David Webb, who helps manage US$2 billion at Shaker Investments Inc.
"The cup being half empty is the more accurate assessment," said Webb, whose company doesn't Hewlett-Packard stock.
IBM's first-quarter sales and profit trailed early forecasts and server sales sank 21 percent, and Fiorina has said her team is readying for the worst. Her targets for US$2.5 billion in cost savings and a 5 percent revenue loss after the Compaq purchase don't depend on an economic rebound.
"The IT industry will never return to the heady days of 20 and 30 and 40 percent growth," Fiorina said last week.
Fiorina was paid US$1 million in salary and received no bonus in fiscal 2001, after getting a salary and bonus totaling US$2.77 million the previous year. She received stock options worth US$13.5 million.
She and her new No. 2, former Compaq CEO Michael Capellas, say the combination means rivals have to rethink their strategies.
Sales teams are handing customers three-year product outlines. Fiorina and Capellas have named the top three layers of management and are mapping out the fourth one now. They tout US$5.3 billion of new contracts signed in the 90 days before the close as proof that customer loyalty remains high.
Fiorina, who won Compaq as Walter Hewlett and other opponents threatened to replace her, may not be safe yet, investors said.
"If the economy starts to recover and business picks up, all sins will be forgiven," Schaff said. "If we stay in this type of environment, she may not survive."
NO RECIPROCITY: Taipei has called for cross-strait group travel to resume fully, but Beijing is only allowing people from its Fujian Province to travel to Matsu, the MAC said The Mainland Affairs Council (MAC) yesterday criticized an announcement by the Chinese Ministry of Culture and Tourism that it would lift a travel ban to Taiwan only for residents of China’s Fujian Province, saying that the policy does not meet the principles of reciprocity and openness. Chinese Deputy Minister of Culture and Tourism Rao Quan (饒權) yesterday morning told a delegation of Chinese Nationalist Party (KMT) lawmakers in a meeting in Beijing that the ministry would first allow Fujian residents to visit Lienchiang County (Matsu), adding that they would be able to travel to Taiwan proper directly once express ferry
FAST RELEASE: The council lauded the developer for completing model testing in only four days and releasing a commercial version for use by academia and industry The National Science and Technology Council (NSTC) yesterday released the latest artificial intelligence (AI) language model in traditional Chinese embedded with Taiwanese cultural values. The council launched the Trustworthy AI Dialogue Engine (TAIDE) program in April last year to develop and train traditional Chinese-language models based on LLaMA, the open-source AI language model released by Meta. The program aims to tackle the information bias that is often present in international large-scale language models and take Taiwanese culture and values into consideration, it said. Llama 3-TAIDE-LX-8B-Chat-Alpha1, released yesterday, is the latest large language model in traditional Chinese. It was trained based on Meta’s Llama-3-8B
STUMPED: KMT and TPP lawmakers approved a resolution to suspend the rate hike, which the government said was unavoidable in view of rising global energy costs The Ministry of Economic Affairs yesterday said it has a mandate to raise electricity prices as planned after the legislature passed a non-binding resolution along partisan lines to freeze rates. Chinese Nationalist Party (KMT) lawmakers proposed the resolution to suspend the price hike, which passed by a 59-50 vote. The Taiwan People’s Party (TPP) voted with the KMT. Legislative Speaker Han Kuo-yu (韓國瑜) of the KMT said the resolution is a mandate for the “immediate suspension of electricity price hikes” and for the Executive Yuan to review its energy policy and propose supplementary measures. A government-organized electricity price evaluation board in March
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has