HP expects higher server revenues

By Jennifer Tan

SINGAPORE: Hewlett-Packard Co, wrestling with a massive $2 billion quarterly net loss after the Compaq merger, said it expects higher storage and server revenues in the current quarter, but was doubtful of a year-end seasonal uptick. "We expect an improvement (in the three months to October 31) over what we have done in the last quarter -- we're seeing increased sales," Janice Chaffin, senior vice president of the Enterprise Systems Group at the world's top computer and printer firm, told Reuters in an interview.

"Customers who have held off their purchasing decisions before the merger are now more comfortable with the new HP, and are starting to go ahead with those decisions," she added. HP closed its $18.7 billion merger with Compaq Computer Corp in May.

In the July quarter, HP's Enterprise Systems Group, which offers storage and server solutions, was one of two loss-making business segments. It accounted for over 20 percent of group sales. Its revenues sank 22 percent year on year to $3.8 billion and operating losses nearly doubled to $422 million from the previous quarter, due to poor demand and severe pricing pressure.

Unsure of uptick

However, Chaffin declined to say when the enterprise systems division could break even or return to the black. "We're looking closely at our business model, to make sure our costs are in line," she said, adding further staff cuts in this segment could not be ruled out.

HP said in August it had cut 4,740 employees from its combined work force and was on target to cut 10,000 by the end of fiscal 2002 in October. Chaffin said that as corporate technology spending had been reduced to a trickle, it was hard to tell if the year-end seasonal demand boost would materialize.

"I'm hesitant to get too excited about that prediction because I've heard it before -- we heard that in the second half, we were going to have an uptick but we've not seen anything so far, so we'll believe it when we see it," she added.

But despite the continued tightening of purse strings, companies are still spending selectively to consolidate their information technology systems to cut operating costs, on disaster recovery and improving their supply chain, she said. HP shares closed over five percent down at $13.60 on Thursday. The stock has slid 34 percent since the start of the year.

© Reuters