HP Chief Cautious About Return of Pent-Up Demand

Associated Press + More

AP Technology Writer

SAN JOSE, Calif.—While other big technology vendors have said they've seen demand bottom out and show signs of recovery, Hewlett-Packard Co. has stayed cautious, warning it's too soon to tell when its business will improve.

HP's CEO, Mark Hurd, reinforced that outlook Thursday. He told investors and financial analysts at a meeting in New York that he's confident HP can hit its profit forecast, but he wouldn't speculate on the timing of a turnaround in tech spending. HP also signaled that even recently announced job cuts won't be enough.

The recession has created a lot of pent-up demand, because it has disrupted the normal cycle of tech upgrades, Hurd said, and when that will get back on track is unclear.

"The buildup now of 4-year-old desktops, 4-year-old notebooks, 4-year-old servers, this is creating quite a bubble," Hurd said at Sanford C. Bernstein & Co.'s "Strategic Decisions" conference. "There's going to be a time when there's going to be some real opportunity here."

Hurd said there is "a little more stability" in the market, particularly in China and U.S. consumer sales. That echoed his comments from HP's quarterly results last week, when the Palo Alto-based company reported a 17 percent drop in profit and a 3 percent decline in sales. The company also announced 6,400 more layoffs, or 2 percent of its 321,000-employee work force.

Already, the company is indicating it will need to cut even more jobs than that. HP said Thursday it plans to slash 5,700 jobs from Europe, the Middle East and Africa over the next two years. Some of those are included in the cuts announced last week, but not all. HP would not offer specifics.

Hurd has been more reserved than the CEOs of Intel Corp., the world's biggest semiconductor company, and Cisco Systems Inc., the No. 1 computer networking supplier. Both of those companies have said their orders appear to have bottomed out.

HP is the top personal-computer maker, and in the last quarter dethroned Dell Inc. in the U.S. Dell was scheduled to report its quarterly numbers after the market closed Thursday.

HP shares rose 48 cents, 1.4 percent, to $34.82 in afternoon trading Thursday.

HP also revealed plans to move production of some servers and data-storage machines from Germany and Scotland to a partner company in the Czech Republic in 2010.