Hewlett-Packard cuts sales goal

Hewlett-Packard Co, the world's second-biggest computer maker, said sales this fiscal year may rise less than it had forecast because companies remain reluctant to boost spending on computer-related technology.

CEO Carly Fiorina cut a sales-growth estimate for the year ending in October to 2 percent to 4 percent from the 4 percent to 6 percent given in June. She said she's maintaining a fiscal first-quarter forecast for profit of US$0.27 a share on sales of US$18.4 billion.

Fiorina also said the company expects to meet a year early its forecast of US$3 billion in savings from buying Compaq Computer Corp. She had promised cost savings to win investor votes for the deal, completed in May for US$18.4 billion, and said today the company has already saved $2.4 billion, 80 percent of her goal.

"It's a cost-cutting story," said Vincent Muscolino, a fund manager at David L. Babson & Co, which manages US$80 billion and holds shares of Hewlett-Packard. "It's easier in this environment to cut costs than grow revenue."

The company's shares fell US$0.63 to US$18.60 at 7:31pm New York time in extended trading. The company's shares declined US$0.60 to US$19.23 in regular US trading and had fallen 53 percent since the Compaq purchase was completed. International Business Machines Corp is the world's biggest computer maker.

Savings of US$651 million in the first six months after the acquisition's close was 30 percent more than the company had forecast, Chief Financial Officer Bob Wayman said last month.

Hewlett-Packard increased its planned job cuts to 17,900 from 16,800 last month.

"We feel pretty good about what we have accomplished six months into the merger," Fiorina said at the start of a two-day meeting with analysts. "We recognize we have more work to do." The personal-computer division will become profitable in the company's first half while the server division should become profitable in the third quarter, Fiorina said. Investors have lauded the job cuts and consolidation of products to meet that goal in its PC and server-computer units.

Some investors had predicted that Fiorina would increase the forecasts, citing a 20 percent rise in October chip sales and higher demand for printers.

"We're not going to raise guidance today because the economy continues to remain uncertain and we want to make sure we're not getting ahead of ourselves," Fiorina said. "The ability to hit our profit target rests in our hands." Previous forecasts from a variety of sources on the economy and spending on computer technology haven't been accurate, Fiorina said. The company is lowering its revenue growth target for next year to make sure it can meet or top analysts' estimates, Fiorina said.

"We're trying to give ourselves some wiggle room," she said. "One of the things we've been pretty good at is setting targets that we can meet or exceed." Hewlett-Packard predicts information-technology spending will increase 2 percent to 4 percent next year, Fiorina said.