Outlook better after tough year for H-P

By PETER GRIFFIN technology writer

The man at the helm of Hewlett-Packard's $US22 billion ($54.4 billion) a year computer division believes there is light at the end of the tunnel for the beleaguered heavyweight.

Speaking in Auckland, Duane Zitzner, president of Hewlett-Packard's computer systems arm, says the company has weathered the storm better than some of its competitors, and outlooks for the rest of the year were improving.

Mr Zitzner was speaking during a visit to NZ to meet the firm's local management and reseller network,

"In the big scheme of things our stock has held up very well but we've been affected like everybody else. I'm more optimistic today than I was before," he said.

The New Zealand arm of Hewlett-Packard recently reported revenues of $255 million for the year to October 31, up from $237 million for the previous 12 months.

The result, which turned a $6.5 million loss in 1999 into a $9.9 million profit, puts Hewlett-Packard at number four in the local market behind EDS, IBM and Compaq, according to analyst group IDC.

But US analysts are expecting Hewlett-Packard to report reduced second-quarter profits and are putting the losses down to increasingly stiff competition from Dell and the general consumer slowdown.

A per-share earnings fall to 35USc from 44USc in the current quarter is expected.

Despite the company announcing in January that it would seek to reduce its global workforce by up to 1700 employees, Mr Zitzner said it had avoided the drastic belt-tightening tactics of others in the computer and semi-conductor industry, but economic conditions and sagging demand in the PC market had taken their toll.

"My research and development bill is much bigger this year than it was last year.

"But I'm being very careful with my investment. I manage it like a hawk, head count and everything.

"If we haven't reached the bottom yet and things deteriorate more, I'm not going to spend it," he said.

The Hewlett-Packard executive, who has share options valued at more than $US16 million, according to Business.com, said he spotted the cracks in the burgeoning dotcom industry early on.

"At one time there were five dotcoms selling dog food. I thought to myself, does this really make sense?"

The key to Hewlett-Packard's future in PCs, according to Mr Zitzner, will be moving into areas such as "always-on" internet infrastructure, personal digital assistants and e-services.

Mike Carden, general manager of Hewlett-Packard New Zealand's consumer products division, said e-services were in an evolutionary stage, but were important to the company's future.

Worldwide, H-P increased revenue %15 per cent to $US48.7 billion in the year to October while increasing profits 6 per cent to $US3.7 billion.

Hewlett-Packard shares on the New York Stock Exchange were trading at $US28.50 ($71.07) last night.