As Asia's PC Market Slows, HP Braces for Difficult Times

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Hewlett-Packard is counting on Asian businesses and consumers to continue spending on laptops and desktop PCs to weather the economic downturn, but the company won't say to what extent that's likely to happen.

"We are in an economic crisis, we are not the industry in crisis, unlike the dot-com bust in 2000 and 2001," said See Chin Teik, senior vice president of Hewlett-Packard's PC business in Asia and Japan. "What we are really going after is, how can we help companies and individuals to come out of this stronger?"

The answer to See's question largely depends on how willing companies and individuals are to open their purse strings to buy new computers in the weeks and months ahead.

Economic growth in Asian markets has slowed because of the crisis, with countries such as Japan and Singapore in recession. Even China -- a pillar of regional growth, and a key market for technology vendors -- is slowing down, with the government recently announcing plans for a US$586 billion stimulus package intended to keep its economy moving.

Reflecting the gloomy economic outlook, IDC this week lowered its PC shipment forecast for 2009, saying unit shipments will increase by 7 percent in Asia, excluding Japan, which will see "low single-digit growth." That represents a sharp reduction compared to the firm's previous estimate, released in September, which forecast Asian PC shipments would increase 17.8 percent in 2009, while shipments in Japan would rise 8 percent.

How the slowing Asian PC market has affected HP, or to what extent its performance will follow wider market trends, is not clear.

Despite the tough economic environment, there are still pockets of opportunity. For example, See expects governments and education customers to continue buying computers. He also sees opportunity in demand for laptops, including netbooks like the company's recently announced HP Mini 1000, and the number of small businesses looking to replace cash registers with PC-based point-of-sale systems.

Whether these opportunities are enough to generate robust sales in the months ahead remains to be seen.

See declined to comment on the business outlook for Asia's PC market, saying he didn't want to make any forward-looking statements that might be misinterpreted as an indication of HP future performance or contradict the company's official outlook. He would only say that a great deal of "uncertainty" now exists in Asian markets.

See also declined to comment on how the Asian PC market fared during the company's recently closed fiscal fourth quarter, noting only that HP's worldwide PC revenue grew by 10 percent to US$11.2 billion, largely because of strong laptop demand. He also said HP remains confident that the long-term prospects of markets, such as India and China, remain strong.

Nevertheless, HP, along with most major technology vendors, is bracing for a slowdown in demand.

HP's official guidance for 2009 includes an expected 5 percent drop in worldwide revenue during the first quarter, reflecting both the "challenging economic environment" and the strength of the U.S. dollar against other currencies.

HP expects to see its annual revenue fall by 6 percent to 7 percent in 2009. The company did not offer a forecast for specific business units or geographies.

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