Compaq revenue tipped to top $320m

By ADAM GIFFORD

Compaq New Zealand expects to exceed 10 per cent growth this year - an achievement in an industry where the good times have gone for many firms.

Going on last year's figure of $292 million, that could push Compaq's revenue over $320 million.

Big wins in hardware and services at Airways Corporation, Fonterra and Meridian Energy boosted the numbers.

"The quality of margin has also improved, so it's a more profitable business," said Compaq managing director Russell Hewitt.

International Data country manager Dinesh Kumar said a double-digit increase in revenue compared favourably with the local IT market, which his firm expected would grow 7.6 per cent this year to $5.2 billion.

"If Compaq say they will grow 10 per cent, that's definitely good," Mr Kumar said.

"It's still not as good as IBM, which we estimate will grow revenue 12 to 15 per cent this year."

Mr Kumar said IBM had been helped from its share of the Australasian deal with Westpac Bank, by strong sales into New Zealand Post and by a focus on hardware sales, including mainframes.

Another to do well this year was IT services company Gen-i. Chief executive Garth Biggs expected 20 per cent revenue growth by the end of the financial year.

Mr Hewitt said that after going like a rocket for the first half of the year, Compaq's business slowed to a crawl after September 11.

When the planned $US22.6 billion ($54.14 billion) merger with Hewlett-Packard was announced in September, Mr Hewitt said the response was to "drive hard" in every sector. "When you get uncertainty about what your brand will represent, you need to push a bit."

Mr Hewitt would not comment on reports that the merger could be in trouble, other than to say "we have a plan B ... and a plan C and a plan D".

Hewlett-Packard's largest shareholder, the David and Lucile Packard Foundation, said it would vote against buying Compaq, joining Hewlett family members opposing the deal.

Management of the two firms are lobbying employees to build up support for the deal.

But an internal memo from Compaq chief executive Michael Capellas raised questions about his commitment to the deal.

Exhorting staff to maintain Compaq's momentum in the market, Mr Capellas said: "Regardless of the circumstances - whether we are part of the new HP or a standalone company - I am confident in our ability to achieve these objectives."

Mr Capellas later said he "absolutely" still backed the merger.

"The merger was all about taking all the great capabilities that Compaq had and creating a really new form of delivery with a complete solution and road map ... so if anybody is questioning that, let there be no doubt. I am completely behind it."

Hewlett-Packard chief executive Carly Fiorina said that despite opposition from the Hewlett and Packard families, it was possible to win sufficient shareholder support.

"Rest assured that we do not intend to give up, and we will continue our efforts to return this company to greatness," she said.

"Everyone of you [staff] can help by staying positive about the merger, educating yourself about its benefits and by delivering strong first-quarter results."

For the deal to go through, two-thirds of Hewlett Packard's institutional investors have to vote for it.

While Hewlett-Packard is the bigger company worldwide, in New Zealand Compaq is almost 20 per cent larger than Hewlett-Packard's local subsidiary by revenue. It has more than three times the staff, a reflection of the wider scope of its business.

Hewlett-Packard NZ manager Barry Hastings said that despite its being a tough year, his company expected to show "5 to 10 per cent growth in local currency".

He said that after years of rapid growth, computer companies had to come to terms with a tighter environment.