CXO

Fiorina: HP's ordering problem now fixed

CEO Carly Fiorina says problem that dented last quarter's financial results is a thing of the past.

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By Stephen Shankland CNET News.com

Hewlett-Packard has fixed the order-handling problem that dented last quarter's financial results, Chief Executive Carly Fiorina said Thursday.

In the quarter ended July 31, HP had "unacceptable execution" problems while migrating to a new computer system for processing orders and managing supplies for servers and storage products. As a result, the Palo Alto, Calif.-based computer and printer company fired Peter Blackmore, head of high-end hardware sales.

The new computer systems are working now, Fiorina said at a Banc of America Securities conference in San Francisco.

"We have completed the migration, and we are now through the order backlog that created," she told financial analysts. "We've been very forthright what those execution issues are. We've taken steps to deal with those and believe those are behind us."

At least one customer is still irked, though. Chris Lopinto, CEO of Hillcrest Technologies in Patchogue, N.Y., only this week got a server he ordered from HP in August—and it arrived "without the operating system preinstalled like it was supposed to be, without a cleaning tape for the backup drive, and with the wrong SCSI cable installed so the machine couldn't see the tape drive," Lopinto said Thursday. "I think they cut a few corners to get boxes out the door."

He ordered another similar HP server about 10 days ago and was told it would take a month to arrive. "Not impressed," he said. "Dell will still ship a comparable one in a week to two weeks."

Dealing with this year's glitch wasn't the first time Fiorina grappled with HP's ordering system. "I was a secretary in the shipping department after my freshman year in college. I spent my time answering the phone and typing bills of lading," shuffling multicolored carbon-copy forms and fixing errors with white-out, she said.

Fiorina said HP is making progress with another problem that hurt the company last quarter: issues with discounts and compensation for European sales channel partners. "We will have a new set of terms and conditions for channel partners in Europe" by Nov. 1, the beginning of HP's fiscal 2005, she said.

Fiorina reiterated HP's relatively cautious projection that the information technology industry will grow only modestly—between 1 percent to 2 percent for 2004. "I think the dot-com boom and bust represented the end of the beginning," Fiorina said. "The industry is more mature today," with growth expected to be double that of the overall economy rather than the fivefold rate during the late 1990s, she said.

HP hasn't been able to return its consulting business to profitability, but Fiorina said the company is "on track to do that in 2005." The problem with the overall consulting industry is that "customers are no longer willing to pay for high-priced bodies and extended engagements. There's too much overpriced capacity," she said.

Overall, HP's position is strong, Fiorina said, with the company able to simultaneously buy back $5.1 billion in stock, pay higher dividends to shareholders than before, invest in research and development and acquire other businesses.

"HPQ is a bargain stock in the technology sector," she said of HP's share price and performance statistics.

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