• This is a partial transcript from Your World with Neil Cavuto, December 9, 2003, that was edited for clarity.

    Watch Your World w/Cavuto weekdays at 4 p.m. and 1 a.m. ET.

    NEIL CAVUTO, HOST: When the Nasdaq is looking pretty healthy these days and technology stocks are coming back these days, is it a sign in general that the market is improving? More to the point, Carly Fiorina on that, the Hewlett-Packard (search) chief executive.

    Carly, good to see you.

    CARLY FIORINA, CEO, HEWLETT-PACKARD (HPQ): Nice to see you, Neil.

    CAVUTO: What do you make about the tease at 10,000?

    FIORINA: Well, I think we’ll get over 10,000 one of these days, as your previous panel said. And I agree with them, that the fact that we hit it and backed off a little bit today isn’t particularly surprising.

    I think the economy is clearly improving. But I don’t think it is such a robust recovery yet that we all ought to start waving the victory flags. I think that is why Greenspan did the right thing today.

    CAVUTO: Are you seeing it in you’re business, though? We’ve heard from a lot of technology chieftains who have been seeing it. IBM has said so, Dell has kind of said so, Intel, in-between said so. Do you buy that?

    FIORINA: Well, I do think you are seeing some encouraging signs. First, I think the segments of the market are behaving differently. We are a very large consumer company. IBM, Cisco, Dell are not.

    We are the largest consumer technology company in the world, in fact, with over $16 billion in revenues. And in the consumer space, we can clearly see technology spending starting to take off again. And the consumer...

    CAVUTO: Among whom? Is it just consumers or businesses alike?

    FIORINA: Well, I think consumer spending is now growing faster than business spending. Small and medium business is a fairly fast-growing segment as well, which is where we also lead.

    I think the enterprise space is the slowest-growing space in technology today. I suspect that will remain the case for some time. I think CEOs and CIOs in the enterprise have learned they can be thoughtful about their technology spend. They don’t have to rush out, they don’t have to throw a hot box at every problem.

    And, in fact, the technology problems that businesses are trying to solve today are more complex, so they take more time. And not every...

    (CROSSTALK)

    CAVUTO: All right. But you must miss the heady days when people were throwing money at anything, right?

    FIORINA: Well, those heady days of the late ‘90’s, when technology was probably a five-times GDP growth industry, they are never coming back.

    CAVUTO: Ever?

    FIORINA: Ever. This is a two-times GDP growth industry. I have been saying that consistently for two-plus years. It doesn’t mean they’re -- by the way, two times GDP is a pretty nice...

    (CROSSTALK)

    FIORINA: As a $73 billion company, we like leading in a two-times GDP growth industry. But it is an era where, how customers use technology and what they expect from technology is different. And frankly, they expect more.

    CAVUTO: You had the biggest merger of all to orchestrate and oversee and get past some reluctant heirs of a dynasty. And you did, that is the Compaq merger.

    Now, everyone says on Wall Street, now prove it can work longer term. And here is where you rub into the rub. You have got IBM on one side, you’ve got Dell on the other, and there is Carly in the middle. Is it that bad?

    FIORINA: No, and like many other things that were said about HP, I think this conventional wisdom is also wrong. The facts simply dispute the thesis.

    People talk about HP being stuck in the middle. The reality is that HP today is leading in the consumer segment, leading in the small and medium business segment, and is leading in Unix servers, Linux servers, windows servers, storage, management software. The fastest, most profitable category in PCs is notebooks, where we already lead Dell and are growing faster.

    I think we are challenging clearly IBM’s managed services business, where...

    CAVUTO: Challenging IBM and Dell?

    FIORINIA: Well, I would argue IBM is challenging, trying to fight a war on seven or eight fronts now. They’ve lost money in their micro electronics business.

    CAVUTO: See, they’re saying just the opposite of that. You know, Sam, Palmisano, the IBM CEO, was quoted in today’s "Journal" -- I’m sure you read that -- saying, "I would not have entered into a war taking IBM on one side and Dell on the other. It’s a really bad place to be."

    FIORINA: Yes. See, I’d much rather have my hand in Sam Palmisano’s right now. Just to finish the thought, IBM has lost money in their micro electronics business, where they’re waging a war against Intel and AMD.

    They’ve lost money in that business six out of the last seven quarters. They lost money in their PC begin nine out of the last 12 quarters. In Linux and storage, which they claim to be great growth opportunities, they’re not number one. We are. They’re not number two. They are number three.

    CAVUTO: They turn around and say to you, Carly, well, you have a great structure behind you, but you are getting aggressive cost- cutting on the printer end and Dell trying to steal your thunder there. And in the same enterprise arena you brag about, IBM is saying they’ve got your lunch there.

    So how do you counter that?

    FIORINA: Well, but the facts don’t support them. In the servers, storage, management software, we lead, IBM does not. In PCs, we are effectively competing against Dell. We are now separated from Dell by less than seven hours of production. In the sweet spot of the market, which is mobility, we already lead them and are growing faster.

    CAVUTO: But do you ever want to be just a direct order market, sort of like the Dell motif? That’s not for you?

    FIORINA: No. The reason it is not for us is because there are too many customers all over the world, as well as in this country, who don’t buy that way. By the way, for customers who do want to buy that way, we offer that.

    But, I would argue, Dell is trapped as a PC company. Eighty percent of their business is PCs, 70 percent is in the U.S. Virtually all of it’s direct. And all of a sudden, they have a competitor breathing down their neck every day who is succeeding in competing against them.

    IBM’s two crown jewels of their business, their crown jewels, managed services. If you stripped out the PWC acquisition of last quarter, they grew their business at one percent. We grew ours at 36 percent. Their mainframe business is under attack from our super dome product, which has been growing at...

    (CROSSTALK)