HP Forecast Adds to IT Vendors Seeing 2010 Uptick

Intel, IBM and McAfee also predict improving landscape

Channel News Roundup:
Ingram Micro Inks QLogic; IBM Opens Offshore Innovation Centers; Brocade Adds Services & Support Certifications.

September 26, 2009

D.H. Kass

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Hewlett-Packard Co. joined a growing list of prominent IT companies expecting the global technology market to pull out of its slump in 2010 and make a surprising about-face.

Speaking at the vendor’s annual analyst meeting, HP chief executive Mark Hurd said that an aging IT infrastructure and a timely corporate buying cycle could dovetail into a noticeable rise in technology spending next year.

“We expect the IT industry to return to growth in 2010 and believe that HP will outpace the market,” Hurd said. “We will grow faster than the IT market.”

Hurd’s remarks echo those he made in August following HP’s third quarter financial report. At the time, he said that HP was confident it will be an “early beneficiary of an economic turnaround.”

HP’s market view mirrors other, similarly positive sentiments emerging with greater regularity across the industry.

Intel chief executive Paul Otellini last week said the global market for personal computers is recovering more quickly than expected and is “poised for resurgence.”

Otellini’s statement followed on the heels of an favorable outlook the chip manufacturer offered in late August when it revised its third quarter revenue projections from about $8.5 billion ahead to about $9 billion. The company will report its third quarter financial results in mid October.

McAfee Inc. chief executive David Dewalt added to the chorus when he told Reuters last week that the software maker was seeing some returns from an improved business spending environment.

This latest spate of optimism follows a positive financial report by IBM in mid-July when it reported a 12 percent boost in net income to $3.1 billion, and an 18 percent spike in second quarter earnings to $2.32 per share.

The increases represented the highest year-over-year quarterly jump for other than fourth quarter results in the company’s history. In response, IBM revised its 2009 earnings forecast upward to at least $9.70 per share from its early $9.20 per share.

Sam Palmisano, IBM chairman and chief executive said at the time that the vendor’s second quarter performance was “well ahead of pace for our 2010 road map of $10 to $11 per share.”

Even Dell Computer Inc., which has posted declines in revenue and profit from the year earlier for four consecutive quarters, recently reported a sequential 10 percent boost in shipments and a 3 percent climb in sales for its second fiscal quarter. The company attributed its improved performance to more stable IT spending, particularly a “sequential increase in sales from enterprise products.”

Not overly confident

Despite Hurd’s projection for HP to outperform the market next year, the company’s confidence isn’t spilling overboard. HP set its revenue estimate for 2010 at $117 billion to $118 billion, somewhat below the $118 billion in sales analysts expected, prompting an immediate—albeit slight--drop in its stock price.

“We expect to drive EPS growth in fiscal 2010 on relatively modest revenue growth,” said Cathie Lesjak, HP executive vice president and chief financial officer. “This highlights the leverage in our operating model.”

Owing to the expanse of markets in which companies such as HP and IBM compete, their performance and outlook is often seen as a barometer of corporate spending in a number of segments, including hardware, software and services.

Hurd said that should business spending improve, HP was “well positioned to win” owing to its mix of technology and services, a cost structure that he described as “much improved from where it was several years ago,” and “operating leverage to improve our financial performance.”

“We plan to be able to fulfill more growth than is in our plan,” he said. “We expect to gain share in a large, addressable market.”

Channel News Roundup:

Ingram Micro Inks Distribution Deal with QLogic

Distributor Ingram Micro Inc., through its Infrastructure Technology Division, has signed a distribution agreement to carry QLogic Corp.’s line of networking infrastructure solutions.

The deal covers QLogic’s range of storage networking products, including its new Fibre Channel over Internet (FCoE) line, 10 Gigabit5 Ethernet (10GbE) and other emerging technologies.

The vendor aims its products at mid- to large-sized enterprise customers in vertical segments such as finance, insurance, manufacturing, aerospace and automotive.

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TAGS: IBM,IT spending,financial,HP,executive

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