XP Wont Jumpstart Economy, Fiorina Says

The launch of Windows XP will not change the fundamentals of the PC industry overnight, and will not have a significant effect on sales of new PCs in the short-term, according to HP Chairman, Carly Fiorina.

NEW YORK -- The launch of Windows XP will not change the fundamentals of the PC industry overnight, and will not have a significant effect on sales of new computers in the short-term, according to Carly Fiorina, chairman and CEO of Hewlett-Packard Co.

"We are going through an economic downturn and the release of Windows XP wont change this or drive the economy to recovery," Fiorina told eWeek Wednesday night at a joint HP/Microsoft digital imaging function at the Metropolitan Museum of Art here. "But what it does represent is a breakthrough in ease of use and functionality."

The release of Windows XP was also likely to drive users, both businesses and consumers, to upgrade over time. In addition, it was getting close to the normal business upgrade cycle, she said. "In time the economy will recover," she said. "We said prior to September 11 that we expected this to occur in the second half of 2002, which is probably still the case."

But what the computer industry currently needed was innovation, and the combination of HPs digital imaging applications combined with Windows XP could help customers reconnect with technology in a new and fun way, she said. "People are not just looking for faster and faster processing power, but also a way to enjoy technology," she said.

Fiorina is not alone in this view. There is also some realism within Microsoft that sales will not surge immediately following the release of Windows XP - particularly not from the enterprise and corporate sector.

Microsoft Group Vice President Jim Allchin recently said as much to eWEEK, agreeing that there was unlikely to be a huge spike in sales from businesses as a result of XP and that more likely there would be an initial shifting of numbers within Microsofts product groups that picked up over time.

He also said that the tragic events of September 11 and the economic downturn made sales predictions difficult, but added that Microsoft was always "very conservative" in its business models.

When asked about the recent sharp loss posted by Compaq Computer Corp., which HP is in the process of trying to acquire, Fiorina said Compaqs loss was not unexpected given the current major economic downturn.

Compaq recently reported a third-quarter loss of $499 million, or 29 cents per share, or $120 million or 7 cents per share if investment losses mostly related to an investment in CMGI were excluded.

Fiorina was also not concerned by the recent refusal of the European Union to ratify the General Electric and Honeywell merger, even though the U.S. Justice Departments antitrust division gave the deal its blessing.

"I am comfortable with the pace of the regulatory process around the HP/Compaq merger," she said. "This is a very different deal based on very different factors and I expect it to be finalized."