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HP board considered breaking up firm 3 times: CEO

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CIOL Bureau
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Duncan Martell



SAN FRANCISCO: The board of Hewlett-Packard Co. discussed breaking up the No. 2 computer maker three times in the past, yet each time decided to keep it intact, Chief Executive Carly Fiorina said, defending her strategy for the company.



As HP outlined plans for aggressive stock repurchases -- saying it would use up the remaining $2.9 billion in its buy back plan in its current fiscal year -- Fiorina said it needed to consistently carry out its plans rather than change them. HP has had an uneven record of financial performance for the last couple of years.



"Our focus now is on delivering consistent execution, quarter after quarter," chief executive Carly Fiorina told the company's annual financial analyst meeting in Boston.



"We absolutely have the right portfolio, the right strategy, the right products, and we're playing in the right markets," she added, saying that the board had rejected breaking up the company three separate times in the past.



"The board has looked at this analytically and dispassionately and in detail three separate times," Fiorina said, noting that membership of the board was different on each occasion. "And each time the board ... came to the same, unanimous conclusion."



HP is the second largest computer maker after rival International Business Machines Corp., which one source said is considering selling its personal computer business.



HP is also the biggest printer maker but has a record of uneven performance since its May 2002 acquisition of Compaq Computer, with a large revenue and profit shortfall in its fiscal third quarter earlier this year.



Merrill Lynch analyst Steve Milunovich, who has repeatedly called for HP to break itself up, freeing its lucrative imaging and printing business, again raised the issue in a question to the 50-year-old chief executive.



Fiorina defended keeping the Silicon Valley legend intact, arguing that its businesses benefit from bundled sales.



"So many of the growth opportunities that are going to drive the business going forward now depend on the power of this portfolio," Fiorina said, referring to HP's four main businesses of servers and storage, services, personal computers and imaging and printing.



She did not specify when the board deliberated a break up.



HP says the problems in its third quarter were due to mismanagement in its computer server and storage business, and difficulties with a software installation to manage its supply chain, leading to results well below expectations. It says it has resolved those issues.



But HP rebounded in its fourth fiscal quarter, with profit up 27 percent on posted record revenue in every business and region and fixed problems with its server and storage unit.



HP also "fundamentally" plans to buy back $2.9 billion in stock, using up the current authorization this fiscal year, Chief Financial Officer Bob Wayman told analysts.



Actual stock repurchases, however, Wayman said, would depend on the Palo Alto, California-based company's share price, repatriation of cash held overseas, and other factors, but could even be higher than the $2.9 billion that remains in its share repurchase authorization.



Fiorina also said in her presentation that HP would not be providing specific financial targets or goals during the company's analyst meeting.



Shares of HP fell 25 cents to close at $21.08 on the New York Stock Exchange. The stock has risen about 26 percent since Aug. 12, the day it warned of the lower-than-expected third-quarter results, sending shares down 13 percent that day.



(Additional reporting by Daisuke Wakabayashi in Boston)

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