DESPITE $2 BILLION LOSS, HP CEO SAYS: WE DID WELL

With bitter proxy battles and a nearly one-year struggle to close the $19 billion acquisition of Comaq Computer behind her, Hewlett-Packard CEO Carly Fiorina delivered the company's first joint financial results last week. Despite a larger-than-expected $2 billion loss, Fiorina said the business integration is on target.

“We are into the hard work of streamlining our operations, closing facilities and optimizing our work force,” Fiorina said in an investors conference call last week. “But given the tough economy and a major integration, we did well.”

Work force optimization will eliminate 10,000 jobs by the end of October, but the company is still hiring in some segments. Restructuring costs and merger-related charges for the quarter totaled about $3 billion, resulting in a per-share loss of 67¢.

With revenues of $16.5 billion for what was HP's third fiscal quarter, the company fell just short of analyst expectations of $16.8 billion. While HP's printing and imaging business carried the quarter with better-than-expected earnings, its personal systems and enterprise systems groups saw revenues decline 18% and 8% respectively from last quarter.

Due to the size of the combined company, it is difficult to gauge the company's performance in the telecom sector because telecom isn't singled out in earnings statements.

Even pre-merger Compaq had a telecom business unit that, while successful, went somewhat unnoticed. “Regardless of how successful its telecom business was, any move on the PC side had a much bigger impact on Compaq's business,” said Larry Goldman, director of service fulfillment OSS at RHK.

The same can be said for HP, which is why the company held separate discussions last week to outline its combined telecom focus. HP created the Network Service Provider Business Unit to consolidate technologies and expertise in both the telecom and the multimedia and entertainment businesses.

Compaq Telecom, a division within the old Compaq, will be rolled into the new HP business unit. The new HP will combine Compaq's telecommunications information management platform, or TeMIP, with its OpenView network management technology. The company also will consolidate its numerous SS7 protocol stacks and other software stacks into the HP Opencall developer portal.

“HP was fighting an uphill battle to be more successful in telecom but was getting blocked by Compaq. Buying the competition is one way to make progress,” Goldman said.

Together the companies account for significant share in several markets, including SS7 software stacks, storage, billing mediation and wireless network solutions such as home location registries.

The goal ahead is to continue melding the OpenView and TeMIP network management software and influencing the industry toward open standards.

“IT companies talk about open systems,” said Joy King, HP's director of worldwide marketing and communications. “But service providers aren't as committed to open systems as they are to open telecom standards. There's a difference.”

In the meantime, HP has another quarter to prove it can turn the enterprise market around, but it isn't overly optimistic about the economy.

“Recent data coming out of Latin America, Europe, the U.S., Japan, and the rest of the [Asia Pacific] region suggests the [further] delay of a global economic recovery,” Fiorina said.