HP gets ready for its close-up

Summary:Hewlett-Packard meets with financial analysts in New York on Tuesday and we'll be blogging from the event. Here are a few items to watch: --HP's enterprise data warehouse.

Hewlett-Packard meets with financial analysts in New York on Tuesday and we'll be blogging from the event. Here are a few items to watch:

--HP's enterprise data warehouse. Merrill Lynch analyst Richard Farmer expects the company to offer more detail on its "efforts to build an enterprise data warehouse (EDW) to support its internal analytics and optimization of company operations." CEO Mark Hurd noted at HP's last analyst day that it would be investing in and creating data models to improve decision making.

--More cost cutting. Hurd has plucked the low-hanging cost cuts, but now Wall Street analysts want his next act. J.P. Morgan analyst Bill Shope says in a research note that the company is likely to cut costs in IT consolidation, procurement and real estate.

On procurement, look for HP to squeeze its suppliers. Shope says:

"HP may look to the supply chain for the next round of savings in PCs...Competitive missteps by Dell and disciplined operating expense reductions have renewed HP's competitive position in PCs. We look for the company to further expand its margin potential with targeted savings in procurement, particularly in the CPU segment."

Meanwhile, HP has to cut its procurement costs because "management recognizes that the enterprise hardware market is going to continue to standardize on lower-margin systems," says Shope.

--Printers will continue to carry the day. HP's printer unit is benefiting by weakness from the likes of Dell, Lexmark and Epson. That trio is less of a threat to HP's inkjet business than they were a year ago, say analysts.

--Revenue growth. Analysts are expecting HP to spend more of its time this year outlining future growth areas for its units. Last year, HP focused on operating efficiency.

--Acquisitions on tap. What HP is going to do with its cash position is also a topic. Farmer expects HP to make small software acquisitions in 2007 to help the company's push to automate customers' data centers. HP is also likely to buy companies that can help its services business.

--The financial outlook. While these aforementioned items are going to be more interesting for technology buyers, the Wall Street types care about tweaks to HP's fiscal 2007 outlook (earnings per share expectations: $2.55). HP is also expected to provide its 2008 outlook. Raymond James analyst Brian Alexander is expecting 2008 projections that are a bit above estimates calling for annual earnings of $2.88 a share. If operating margins improve to the 10 percent mark, earnings of $3 a share are realistic. The meeting will also mark CFO Bob Wayman's swan song. He's retiring Dec. 31 and will be replaced by current treasurer Cathie Lesjak.

Topics: Hewlett-Packard


Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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