This article from NYTimes.com has been sent to you by [log in to unmask] /-------------------- advertisement -----------------------\ Share the spirit with a gift from Starbucks. Our coffee brewers & espresso machines at special holiday prices. http://www.starbucks.com/shop/subcategory.asp?category_name=Sale/Clearance&ci=274&cookie_test=1 \----------------------------------------------------------/ Hewlett Lifts Profit Outlook and Each Side in War Exults February 5, 2002 By STEVE LOHR Hewlett-Packard (news/quote) announced yesterday that its first-quarter earnings would be "substantially above" Wall Street's estimates because of stronger sales of personal computers and printers and reduced expenses. Both sides in the spirited proxy contest over Hewlett-Packard's plan to buy Compaq Computer (news/quote) pointed to the performance, which was better than expected, as proof of their claims. Carleton S. Fiorina, the chief executive of Hewlett-Packard, said the announcement was evidence that the company had not lost focus on its business and that customers were not defecting, despite worries from critics that planning the merger would prove to be a debilitating distraction. A spokesman for Walter B. Hewlett, an heir of the co-founder and the leading opponent of the deal, said the improved performance suggested that the company was in solid shape, so there was no justification for gambling with Hewlett-Packard's future by acquiring Compaq. Ms. Fiorina, speaking to hundreds of investment bankers and institutional investors at a conference in California, expressed optimism that the proxy fight was finally turning in management's favor. Immediately after the big merger plan was announced in early September, the Wall Street reaction was skeptical. Later, the heirs of the founders and the foundations they control declared they would vote their 18 percent of Hewlett-Packard shares against the deal. But Ms. Fiorina told her audience yesterday: "I come here today confident that we have turned the corner on this merger. The momentum is shifting." Last week, the European Commission said it would raise no antitrust challenge to the proposed merger. And Compaq reported earnings last month that were better than analysts' reduced expectations after Sept. 11. "Today's positive earnings update - just like last month's earnings announcement by Compaq and our fourth-quarter results before that - proves what the people of these two companies can accomplish," Ms. Fiorina said at the conference, which was sponsored by Goldman, Sachs & Company. "We aren't distracted by the merger or the challenge of integration. And our customers aren't defecting." The spokesman for Mr. Hewlett disputed Ms. Fiorina's assessment of the campaign for shareholder votes. Most investors polled by the opposition camp remained against the deal, he said. The improvements in the quarterly outlook, he added, "demonstrate the underlying strength of the company and point out the inherent fallacy of a bet-the-company merger with Compaq." Hewlett-Packard said that its earnings for its first fiscal quarter, ended Jan. 31, should be well above the Wall Street consensus estimate of 16 cents a share. In November, the last time management briefed analysts, Hewlett-Packard said it expected revenue to be soft and expenses to be roughly the same as the previous three months. But after a falloff in sales and consumer confidence after Sept. 11, demand for PC's and printers has rebounded more quickly than anticipated. The consumer market in December, typically a strong one for holiday sales of PC's, seems to have returned to normal, analysts said. By yesterday afternoon, six Wall Street analysts - a third of those who follow Hewlett-Packard - had reported revised earnings estimates for the quarter. The new consensus estimate was 25 cents a share, up from 16 cents, according to Thomson Financial/First Call, which tracks analysts' earnings forecasts. Hewlett-Packard's revenue for the quarter will probably reach $11.2 billion, said Don Young, an analyst for UBS Warburg, or $300 million higher than his previous estimate. But Mr. Young, a skeptic on the Compaq merger, still questioned whether the improved earnings prospects for the quarter would sway shareholders. A vote has not been scheduled, but will probably come sometime in March. "I doubt if anybody's view of the deal will be based on a single quarter's results, one way or the other," Mr. Young said. http://www.nytimes.com/2002/02/05/technology/05HEWL.html?ex=1013942295&ei=1&en=6e8b3f2d4f578136 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact Alyson Racer at [log in to unmask] or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to [log in to unmask] Copyright 2002 The New York Times Company * To join/leave the list, search archives, change list settings, * * etc., please visit http://raven.utc.edu/archives/hp3000-l.html *