A surprisingly rosy earnings report from Hewlett-Packard Co. helped fuel a stock-market rally yesterday that boosted the Dow Jones industrial average above the 11,000 mark for the first time in two months.
Hewlett-Packard soared more than 16 percent, to close at $94.31 1/4, after the company reported a sales increase of 10 percent in the past quarter. The robust growth provided an optimistic launch for yesterday's initial public offering of the company's testing and measurement spinoff, Agilent Technologies Inc.
Agilent shares opened yesterday on the New York Stock Exchange at $45.50, a 52 percent premium over the $30 offering price. The stock closed at $44 a share. Hewlett-Packard investors will get Agilent shares when the spinoff is complete.
The strong performance of the two stocks as well as those of other technology companies--including Intel Corp., which rose $3.75, to $78.50--pushed the Dow up 152.61 points, to 11,035.70.
The Nasdaq composite and Standard & Poor's 500 indexes continued to break records. The Nasdaq jumped 77.72, to 3347.11, and the S&P rose 14.23, to 1424.94.
Hewlett-Packard announced at a late Wednesday meeting with Wall Street investors that sales had grown from $10.3 billion to $11.4 billion, higher than analysts had expected. Net income was 75 cents a share excluding expenses related to the Agilent spinoff, according to the company.
Despite the gains, analysts said the company faces enormous challenges on several fronts. Chief executive Carleton S. "Carly" Fiorina warned that year 2000 computer issues could hamper growth next year. And while the company is a leader in printing and imaging technology, its other high-technology gadgets lag behind its competitors'.
"They are getting destroyed by Sun [Microsystems Inc.] in the Unix server market and they are not keeping up with Dell [Computer Corp.] on PC servers. They are getting steamrolled by EMC [Corp.] on the storage side," said ABN Amro Inc. analyst Jonathan Ross.
In the past year, Hewlett-Packard, which is based in Palo Alto, Calif., has tried to catch up by making investments in more than 100 Web-related ventures by donating hardware in exchange for a percentage of revenue, Ross said. The largest deal that has been announced publicly is with telecommunciations giant Qwest Communications International Inc. to provide one-stop shopping for electronic businesses. Yesterday, Compaq Computer Corp. and British telecommunications group Cable and Wireless PLC announced a similar alliance, providing a direct competitor to HP-Qwest.
Meanwhile, the buzzwords surrounding Hewlett-Packard's strategy for future success appear to be "friendly marketing."
In a speech at the Comdex computer trade show in Las Vegas on Monday, Fiorina said she hoped to make the Internet a more welcoming place. Companies, she said, will either let the Net stay "cold and impersonal" or change it to become "pervasive, warm, friendly and personal." She unveiled a new company logo with the word "invent" below Hewlett-Packard and announced a $200 million global marketing campaign.
Coincidentally, Salomon Smith Barney Holdings Inc. analyst John B. Jones Jr., who said he hadn't heard Fiorina's speech, also said yesterday that one of the company's biggest hurdles in the coming year will be to change its marketing strategy--to a "more hands-on, touchy-feely model."
Staff writer David Streitfeld contributed to this report.
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