Hewlett-Packard's big miss says next to nothing about the health of the tech sector.
August 20, 2003: 8:51 AM EDT
By Justin Lahart, CNN/Money Senior Writer
NEW YORK (CNN/Money) - It's easy to come up with reasons to hate technology stocks. As always, Hewlett-Packard is not one of them.
The company's earnings and sales miss Tuesday night is nothing short of stunning -- unless, of course, you take its long history of disappointing investors into account. This company would have a hard time selling sweaters to naked people in Newfoundland.
No, it's not just about Dell, but Dell is a good starting point. For the quarter ended Aug. 1, Dell saw its sales increase by 16 percent versus the year-ago period. Sales were also up sequentially from the prior quarter, and the company said that the good times would keep on rolling in the current quarter.
HP, in contrast, saw sales grow by just 4.9% in the quarter ended July 31 from the year-ago period, and they were down sequentially from previous quarter.
That's even worse than it seems when you consider the environment the computer makers are operating in right now. This year has seen a surge in demand for PCs as companies finally bit the bullet and got around to replacing the desktops they put in place ahead of Y2K. According to the Commerce Department, spending on computers was up an annualized 18.6 percent in the second quarter.
Now, you have to think that a lot of these computers that companies bought ahead of Y2K were built by HP and its merger partner, Compaq. The implication in HP's lousy report is that companies are replacing their HPs and Compaqs with Dells.
The other implication of HP's miss? That its management has absolutely no idea what's going on at the company. The past few months have as number of fawning reports on how HP had finally digested the Compaq merger, and the shares of the company moved up handsomely from where they began the year. You would think in those circumstances HP management would have tried to bring down investor expectations.
But they didn't, which makes it seem that they were just as surprised by the miss as Wall Street was.
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