HP CEO Mark Hurd Sees 'Challenging' PC Market in 2009

Despite posting an upbeat fourth-quarter financial report, Hewlett-Packard CEO Mark Hurd warned that company will face a “challenging” PC market in 2009, leaving the door open for more cost cutting in the coming year.

HP, the world’s largest PC vendor, officially posted its fourth-quarter financial results Nov. 24. The company had already released preliminary numbers Nov. 18, which took much of the drama out of the release of the official numbers.

In the fourth quarter, HP reported that its revenue for the fourth financial quarter stood at $33.6 billion, an increase of 19 percent from a year ago. HP also reported that the company is expecting earnings of 84 cents a share this quarter, or $1.03 per share when those numbers are adjusted. HP saw earnings of 86 cents a share a year ago. However, HP did report that its net earnings dropped 2 percent year over year from $2.2 billion in 2007 to $2.1 billion this quarter.

While HP’s numbers were a silver lining in the IT market that saw Advanced Micro Devices and Sun Microsystems announce job cuts in the last month, Hurd warned that the company will face a challenging global market in 2009, especially when it comes to PCs.

“We’re guiding conservatively, or I should say conservatively down from where we have been,” said Hurd when asked about the PC market in 2009. “We are trying to be cautious, and we are trying to be thoughtful in the revenue [forecast] we are giving. We think it will be a challenging environment, and we are planning as such.”

Hurd’s concerns about the 2009 PC market reflected a similar outlook that CEO Michael Dell offered just a week before, when his company announced its latest financial results. Michael Dell said his company, the world’s second-largest maker of desktops and notebooks, was taking a “conservative” approach to the PC market in the next year.

Even with those warnings, HP showed that its ability to sell PCs both in the United States and overseas helped the company’s bottom line in an unstable financial environment. During its financial fourth quarter, HP’s PC division watched its revenue increase 10 percent to $11.2 billion and shipments increased 19 percent.

While HP’s notebook revenue increased 21 percent, its desktop revenue fell 2 percent. HP also managed to grow its commercial client revenue by 7 percent despite the financial crisis and concerns that enterprises are starting to cut hardware spending.

A lot of HP’s success in the PC market, both in terms of revenue and shipments, comes from overseas sales. In the fourth quarter, HP reported that 68 percent of its revenue comes from outside the United States.

In his comments to reporters, Hurd noted that to continue growing HP’s share of the PC and other IT markets, he will cut some $1 billion in expenses from the company’s budget in the coming year. While Hurd did not offer specifics, HP is expected to cut back on discretionary spending, such as travel, and cut back on hiring. HP already announced that it will shut down for an extra week during the 2008 holiday season.

“There is never a time when we are not looking hard at our costs,” said Hurd.

While HP is best known as a company that specializes in desktops, notebooks, printing and other hardware, Hurd did use the quarterly earnings result to emphasize the company’s push into IT services, especially after the EDS acquisition. In its fourth-quarter results, HP reported that revenue from its IT services division increased 99 percent to $8.6 billion. That number included $3.9 billion in revenue from EDS.