HP Notebook PC chief sees good growth ahead

By Duncan Martell

SAN FRANCISCO (Reuters) - Hewlett-Packard Co. expects a strong back-to-school

season for its notebook computer business and sees no signs of the consumer

laptop PC market slowing, an HP executive said on Wednesday.

The PC industry is gearing up for back-to-school, one of the strongest parts

of the year for the industry, and which is soon followed by the holiday shopping

season at the end of the year, the biggest annual sales surge for the technology

industry.

"We're predicting strong growth rates for back-to-school," said Ted

Clark, senior vice president and general manager of HP's notebook PC business,

in an interview. "Overall, I'm optimistic about the business."

HP's notebook business rolled out more than a dozen products and services

early last month aimed at consumers and businesses, including newly redesigned

business laptops and HP Pavilion and Compaq Presario notebooks for consumers.

And despite recent concerns that consumers may be getting stingier and

slowing their purchases, Clark said he hasn't yet seen any such indications.

"I'm not seeing that," Clark said when asked about waning consumer

demand in notebooks. "Consumer remains quite strong."

While the notebook market overall continues to grow, there are pockets of

moderating growth, Clark said, with most slowing in the commercial laptop

business in Europe.

But strong notebook demand in newer markets such as China and India remains.

"We'll continue to see great growth out of India," Clark said.

HP's PC business, which HP calls its Personal Systems Group, has been posting

improved results for more than a year now, even before current Chief Executive

Mark Hurd took over from Carly Fiorina in April 2005.

Fiorina resigned in January 2005 after a disagreement with the board over how

to run the company and after failing to generate the financial results she had

promised.

MARGINS

In HP's most recent quarter, its fiscal second, notebook revenue rose 27

percent from the year-earlier period, and overall PC revenue, including

desktops, rose 10 percent to $7.0 billion. Its operating profit margin was 3.6

percent, wider than the 2.3 percent in the year-ago quarter.

In the first quarter, HP gained 2.4 points of share in the notebook market

from a year ago and is now less than half a point behind Dell as the No. 1

notebook PC maker, Clark said.

Clark also implied that operating profit margin in HP's laptop business would

also continue to improve, though he declined to give the specific operating

margin for HP's notebook business.

"There are more dollars to take out" in terms of cost savings in

the notebook business at HP, Clark said. "But we like the trajectory we're

on."

HP continues to cut costs as well as jobs in its bid to boost profitability

and become more nimble to compete better against rivals including International

Business Machines Corp., Dell Inc. and Lexmark International Inc.

On Tuesday, HP said it would further streamline its business by combining

some operations as it continues a restructuring announced last year that

includes job cuts of more than 15,000.