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Technology
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H-P lifts 1Q guidance
graphic February 4, 2002: 1:34 p.m. ET

PC maker says improved demand, pricing helped boost sales, profits.
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  • Hewlett fights to stop HP-Compaq deal - Jan. 23, 2002
  • EU appproves HP-Compaq deal - Jan. 31, 2002
  • HP says 65% of employees like merger - Jan. 25, 2002
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  • Hewlett-Packard
  • Compaq
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    NEW YORK (CNN/Money) - Hewlett-Packard Co. said Monday it expects first-quarter earnings to be "substantially above" Wall Street forecasts as the computer maker struggles to complete its planned acquisition of Compaq Computer Corp.

    The maker of personal computers, high-end workstations, printers and other computer gear also raised its guidance on sales, saying it now expects revenue for its first quarter ended Jan. 31 to come in higher than the fourth quarter. Analysts had been forecasting that the Palo Alto, Calif.-based company would earn 16 cents a share in the first quarter, down sharply from 41 cents a share a year earlier, according to First Call, which tracks Wall Street forecasts.

    At least one Wall Street analyst said HP's guidance is marginally good news, but that for investors, the bigger issue is whether the company can pull off a deal with Compaq.

    "The really big overhead issue is the merger. There's just a tremendous amount of uncertainty around that," Sanford Bernstein analyst Toni Sacconaghi said. "It's hard to get people excited about, or confident about, the stock given the uncertainty around the merger. If it goes through, there's uncertainty around pulling off integration. If it doesn't go through, the leadership of HP is in question."

    HP (HWP: down $0.23 to $21.77, Research, Estimates) stock, which initially jumped on the news, was up just 9 cents in afternoon trading Monday. Compaq (CPQ: down $0.18 to $11.92, Research, Estimates) was down 12 cents.

    "Economic conditions around the world continue to be challenging, but consumer technology spending is clearly showing some strength," HP Chief Executive Carly Fiorina said in a statement. "As a result, we are seeing better-than-expected revenues in our PC and imaging and printing businesses."

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    HP warned on Nov. 14 that first-quarter sales would fall slightly from the fourth quarter due to a normal seasonal slowdown. But it said Monday that an uptick in consumer demand, combined with improved pricing for PCs and printing products, would help results in its just-ended quarter.

    HP also said its expenses would be little change from the fourth quarter.

    However, Sacconaghi said some on Wall Street believe HP had been too conservative in its earlier guidance, noting that HP's first-quarter sales were down only marginally going back to 1992.

    The company's previous forecast of lower sales was also surprising given the uptick in demand that began in November, he said.

    The announcement comes after European regulators last Thursday approved HP's controversial $25 billion offer to buy Compaq.

    The deal, on which analysts have said Fiorina's job depends, has run into fierce opposition from HP director Walter Hewlett - the son of company co-founder William Hewlett - and other shareholders.

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    "We remain convinced that we are up to the task of successfully integrating Compaq and creating a powerful new HP," Fiorina said in Monday's statement.

    Walter Hewlett has launched a campaign to block the deal and began meeting with institutions that own the computer maker's stocks in December. Additionally, the David and Lucille Packard Foundation, which owns about 10 percent of HP, made a preliminary decision to vote against the merger. Combined, both groups and other company heirs opposed to the deal own about 19 percent of HP's shares.

    HP, along with other PC makers, has been struggling with a sharp drop in demand as the economy fell into a recession and companies slashed spending on new technology. Consumers have also cut back.

    PC makers and other tech companies have cut prices in a bid to fuel sales, but that has eroded profits. graphic

      RELATED STORIES

    Hewlett fights to stop HP-Compaq deal - Jan. 23, 2002

    EU appproves HP-Compaq deal - Jan. 31, 2002

    HP says 65% of employees like merger - Jan. 25, 2002

      RELATED LINKS

    Hewlett-Packard

    Compaq





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    Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.

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