HP predicts tech bounce-back

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HP has echoed predictions that the recession, at least in the US, is drawing to a close as it forecast an overall increase in IT spending in 2010. Nevertheless, it still set a fiscal 2010 revenue estimate that came in just below Wall Street’s expectations.

The IT industry will return to growth in 2010, and HP should outpace that growth, chief executive Mark Hurd has told an audience at the company’s yearly analyst meeting.

Shares of HP, a bellwether for corporate spending on hardware because of its diverse, sprawling businesses, slid 1.9 per cent to $46 after hours, from a regular close of $46.87.

“I know we’ll get questions about how fast the market’s going to grow,” Hurd said. “Whatever that answer is that’s handed to us in 2010, we will grow faster.”

“We expect the IT industry to return to growth in 2010 and believe that HP will outpace the market.”

Many technology companies are looking forward to a corporate hardware refresh cycle that is expected to begin next year, as large companies move to replace aging machines with the latest equipment.

While HP assumes there will indeed be a resumption in spending, “we haven’t planned for it to be really robust and we’re waiting to see what really happens,” chief financial officer Cathie Lesjak said on a call with reporters.

She added that the company typically plans conservatively.

HP last year acquired EDS in a blockbuster $13 billion deal that transformed the company into the number two provider of IT services, behind only IBM. HP said it has wrung out $900 million in savings from the integration so far, which would rise to $3 billion by the time the process is completed.

Frost & Sullivan analyst Ronald Gruia praised the company’s constant attention to expenses and said it stands to benefit from an expected rebound in tech hardware.

“The PC rebound is primarily going to be driven by strong retail notebooks, which is HP’s sweet spot, and that bodes really well for them,” he said. “Their services margin will continue to improve and I think they’re managing the EDS integration well.”

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