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HP Chief Executive Officer Mark Hurd stood before a group of financial analysts this week and gave an upbeat, but somewhat muddied look at the company’s fortunes for the year ahead.
Hurd touted the company’s portfolio of products and its broad IT services reach, thanks to its acquisition a year ago of EDS, as a key plank to take advantage of a global recovery. The combined portfolio will allow HP to expand into new markets and compete on a more even footing with IBM, he said.
“We expect the IT industry to return to growth in 2010 and believe that HP will outpace the market,” Hurd said in a statement to the analysts. “Our broad product and services portfolio and global scale give HP a clear competitive advantage. As a result, we see tremendous opportunity to grow our business and improve earnings while delivering value to our customers.”
Sounds great, but here’s where it gets a little muddied. HP predicted sales for the fiscal year ending in October 2010 would rise to $117 billion to $118 billion, a 3% to 4% increase. While not bad considering the past year, it would put HP shy of some analyst expectations. Also, with the global economy expected to swing back to growth, a 3% to 4% gain is a pretty conservative forecast and doesn’t really sound like HP is going to “outpace the market.”
“We typically plan for modest growth and to drive reasonable returns off that modest growth,” Hurd said during the meeting.
In terms of segments, the company is predicting a 2% to 4% growth in its IT services revenue with a 15% to 17% margin. After a tough year, the PC business is expected to swing back to a 3% to 5% gain, while software sales will have a stronger year with a 7% to 9% increase. The printing division, which enjoys a 15% to 17% operating margin, will lag with only a 2% growth.
Overall, it is a positive outlook after a dismal year and provides further optimism for the technology sector in general. But it’s not quite a return to boom times and indicates companies are still wrestling with IT budgets.
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