Carly Fiorina's ouster as chief executive officer and chairman of Hewlett-Packard and continued jockeying among suitors for MCI fueled trading in tech stocks this week.
HP shares jumped Wednesday after the company announced its board had dismissed Fiorina, whose tenure had been marked by continuing controversy over its 2002 acquisition of Compaq Computer. Investors appeared to like the fact that the long-running debate over Fiorina was over, driving the value of company shares up by US$1.39, to US$21.53, on the day the news broke.
Fiorina pushed the idea that by acquiring Compaq, HP could compete with Dell Inc. in the PC market and bolster services to go toe-to-toe with IBM. But this strategy has failed to instill confidence in the company, as its shares have lost more than half of their value since Fiorina was named CEO in July 1999.
Company officials hastened to say that the dismissal does not mean a change in course. Some major analysts took the company at its word.
"These comments suggest that a significant change in strategy -- for example, separating the PC and printer divisions -- is unlikely. We do not believe that a separation of the two divisions makes sense," said Richard Gardner, an analyst with Smith Barney, in an investment report. Not all major analysts took that view, and some investment companies called for a spin-off of the printer and PC businesses, which were consolidated into one unit in January.
Meanwhile, Dell, the number one PC maker and HP's archrival, said Thursday that it saw positive news throughout its hardware lines in the quarter ending Dec. 31. It met analyst expectations for revenue and beat forecasts for income. Excluding one-time charges, net income was US$947.0 million, with earnings per share of US$0.37, edging the analyst consensus expectation of US$0.36.
Answering the inevitable question in a conference call after the market closed Thursday, Kevin Rollins, Dell's chief executive, said that the company might be able to take advantage of an "unsettled environment" in the PC market, in the wake of Fiorina's departure and IBM's agreement last year to sell its PC business to Lenovo Group. In anticipation of the Dell earnings news, traders pushed the value of Dell shares up by US$0.58 to US$41.57, close to the company's 52-week high of US$42.57.
While PC company investors had plenty of news to chew on, the telecom market continues to churn in the wake of SBC Communications Inc.'s announcement last week that it would buy AT&T Corp. Verizon Communications Inc. sweetened its appeal to MCI this week, with a bid close to Qwest Communications International Inc.'s offer of $6.3 billion, according to a report in The Wall Street Journal. MCI shares have continued to trade about a dollar higher than before the SBC news last week, closing Thursday at $20.46.
In other tech market news:
--Advanced Micro Devices Inc. shares spiked in value as investment bank Morgan Stanley raised its rating on the chip maker to "overweight" from "neutral." Morgan Stanley put a 12-month price target of $25.00 on the stock Wednesday, saying it expects AMD to reduce its exposure to the low-margin flash memory business. AMD shares rose by $0.30 Wednesday, to $17.94, though they sank back to close Thursday at $17.75.
--Cisco Systems Inc. slipped during the week in the wake of its earning announcement Tuesday. The networking company's profits for the quarter ending Dec. 31 matched analyst expectations but sales fell short and officials appeared cautious about the current quarter. Cisco fell by $0.39 to $17.85 Wednesday and fell again to close Thursday at $17.58.
Additional reporting by Tom Krazit in San Francisco.