HPs PC Group Makes Gains as Dell Slips

 
 
By Jeffrey Burt  |  Posted 2006-05-16 Email Print this article Print
 
 
 
 
 
 
 

Strong financial results reported from the second quarter have analysts comparing Hewlett-Packard to its rival, Dell.

The second quarter was a good one for Hewlett-Packard, with strong revenue growth of 5 percent, higher-than-expected profits of $1.7 billion and a prediction for the current quarter that also exceeds what financial analysts are expecting. Yet despite all that, much of the focus of industry observers during HPs quarterly earnings call May 16 was on its PC business and top rival Dell. HPs Personal Systems Group saw a 10 percent year-over-year revenue growth, to $7 billion, and a 16 percent growth in shipments, and is gaining market share, according to CEO Mark Hurd. Meanwhile, Dell has sustained setbacks.
Dell, of Round Rock, Texas, May 8 said its fiscal first-quarter results would miss earnings targets, in a large part due to pricing decisions that officials said would eventually result in revenue growth in the third quarter.
Dell is scheduled to release its third-quarter results May 18. During conference calls with reporters and analysts, HPs Hurd deflected comparisons with Dell, saying that HP, of Palo Alto, Calif., was more focused on providing value than on gaining share in a highly competitive market that is seeing continued encroachment by other players, such as Lenovo Group and Acer.
"Its not our sole objective … to gain share just to gain share," he said. "Were very focused on running a good business. … [Market share] is not the primary driver of how we do business." Hurd also cautioned that the real test for a company is making strides over a number of years. HPs PC business had been seeing steady improvements even before he took over from Carly Fiorina in March 2005, Hurd said. The first few quarters after the 2002 acquisition of Compaq Computer were difficult ones, but since then HPs business has been growing. Click here to read more about HPs new notebook line. Hurd attributed some of the growth in more recent quarters to trends in the market, including the migration toward mobile PCs and the growth of the emerging markets and consumer segment. "They play to our strengths," he said. For example, notebook revenue grew 27 percent, compared with 1 percent for desktop PCs. In addition, consumer client revenue jumped 24 percent, while commercial client revenue grew 3 percent. To bulk up on its enterprise business—not just with clients, but also with such products as servers and services—Hurd said HP over the next few quarters will hire "hundreds" of sales people who will be focused on HPs largest customers. "Its important for us to cover these accounts," he said. Answering several questions regarding the pricing environment for PCs, Hurd said he hadnt seen anything unusual in the quarter. "We continue to see aggressive behavior in the PC market," he said. "I wouldnt say anything we saw was unique in the quarter." One industry observer agreed. Roger Kay, an analyst with Endpoint Technologies Associates, in Wayland, Mass., said he had heard rumors coming out of Asia about very aggressive pricing environments, but, "I havent seen anything all that unusual." HP has a new fan design in the works. Read more here. Kay said Hurd has done a good job over the past year by cutting expenses and seeking out revenue generators at HP. However, he said,it would be wrong for people to count out Dell simply because of a bad quarter or two. "Whatever it is thats been bothering Dell is probably not going to be systemic," he said. "I wouldnt be surprised to see Dell surge again." Dells numbers—though below expectations—still show a very strong company, he said. According to research firm IDC, in Framingham, Mass., total PC shipments in the first quarter jumped 12.9 percent over the same period last year. Dell saw its market share drop from 18.6 percent to 18.1 percent, while HPs share rose from 15.1 percent to 16.4 percent. Check out eWEEK.coms for the latest news in desktop and notebook co
 
 
 
 
 
 
 
 
 
 
 

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