Advertisment

HP: Gazing into the crystal ball, but at what cost?

author-image
CIOL Bureau
Updated On
New Update

Why would HP CEO Carly Fiorina put so much pressure on herself — so

unnecessarily — by upping an earlier 15 per cent 2001 sales growth target to

17 per cent?

Advertisment

Already, HP's stock has plunged to just $32. In the face of an increasingly

shaky global economy picture, slowing sales in Internet servers (as the dotcom

industry suffers from corporate evaporation), and sharp declines in PC sales, no

one would have faulted HP for cautioning slower than anticipated sales growth.

HP's stock would probably have gone down a bit. It did anyway, but by a whopping

10 per cent. And some would argue the stock slit just because the 17 per cent

forecast appears somewhat unrealistic.

Most high-tech companies, including Intel and Microsoft (and HP until

recently) are traditionally ultra-conservative in their sales forecasts because

high-tech firms are expected to beat their forecasts.

If HP would have taken a more cautious route, achieving a 17 per cent growth

level would have been seen as a major achievement in the face of economic

adversities, resulting in a significant positive reaction on Wall Street. Now,

17 per cent growth is merely meeting forecast, something that gets little or no

attention on Wall Street. To impress, HP’s sales would have to grow 20-22 per

cent, something that would seem inconceivable at this point.

Where would that growth come from? Even Fiorina said HP's PC sales are

suffering from the same industry-wide slowdown that is impacting Dell, Gateway

and Apple. That means printer sales, another major revenue source, will be

impacted as well. Other business units will have to overcome all of that and

then some to meet or beat the 17 per cent growth rate.

Not meeting the 17 per cent level will likely set up Fiorina for a long-term

struggle to achieve the level of credibility Wall Street is looking for.

Credibility that has already been shaken by the PricewaterhouseCoopers merger

fiasco. Fiorina, eager to succeed, clearly is taking a big gamble with the

company's forecast in the face of many major uncertainties over which HP has

little or no control. We should hope it will turn out to be a good bet.

tech-news