Feeds

HP's Whitman: 'I will turn this company around – by 2016'

Fewer PCs and printers, more high-priced contracts

Boost IT visibility and business value

During a meeting with financial analysts on Wednesday, HP CEO Meg Whitman said her plan to turn around the ailing company was on track, but the restructuring won't be complete until 2016 and investors should expect HP's earnings to shrink even further before the work is done.

In August, HP reported a loss of $8.9bn, with revenues down across nearly every division. During Wednesday's meeting, Whitman warned that this was likely to be a trend, and that investors should expect HP to earn between $3.40 and $3.60 per share for fiscal 2013, a decline in revenues of more than 10 per cent.

But Whitman says she has a plan to stop the bleeding – eventually – if HP's investors and its board will just stick with her. Whitman is HP's fourth CEO since 2005, having taken the job after the board booted its previous top exec, former SAP chief Léo Apotheker, in 2011. During her presentation, Whitman blamed the executive musical chairs at HP for causing "multiple inconsistent strategic plans and executional miscues limiting speed of recovery."

Whitman said the company lacked competitive focus and that it had spread its business across too many products, services, and regions. She also said it had seriously underinvested in IT and in R&D – a point that should please readers who mourn "the old HP."

Mostly, though, she said turning HP around would require changes across its entire business, setting the stage for a parade of HP execs who explained how each division is working to help the company right itself.

First up were Mike Nefkens and JJ Charhon of HP Enterprise Services, the struggling division that was forced to take an $8bn writedown in goodwill assets in August over HP's bungled 2008 acquisition of EDS. Their take on the turnaround plan was simple: Enterprise Services needs to earn more money.

Nefkens and Charhon said that "poor contracting practices" had caused HP to make "excessive pricing concessions," leading to "resource management challenges." In other words, HP needs to quit giving away the farm and charge its enterprise customers more.

The plan now is for Enterprise Services to whip underperforming contracts into shape with the aim of growing its revenue by 3 to 5 per cent annually. Long term, it wants about 80 per cent of that revenue to come from its core data center, applications, and business-process outsourcing businesses, with the other 20 per cent coming from higher-margin services such as security, mobility, data analytics, and cloud computing.

Over in the Printing and Personal Systems division, which handles HP's PC and printer businesses, executive VP Todd Bradley said HP plans to cut costs by consolidating and slimming down its product lines. That means it will reduce the number of printer models it sells by 30 per cent by the end of 2014, and chop down the number of PC platforms it offers by 25 per cent in the same timeframe.

Bradley said HP's PC business will continue to focus on adding sexy design to its products – something Whitman has been talking up lately, and an area where HP has long been lacking in comparison to brands like Apple and Sony.

Meanwhile, the printer group is hard at work trying to push more inkjet products, including expanding its Ink Advantage program for low-end customers into more countries and launching an Ink in the Office initiative to nab business customers. According to Bradley, HP's share of the ink market is already up more than 15 per cent since last year and he expects double-digit revenue growth in fiscal 2013.

Dave Donatelli, executive VP of the HP Enterprise Group, said the three big data center trends today are infrastructure convergence, cloud, and software-defined data centers, and that HP is driving all three. He also called attention to HP's pioneering Project Moonshot initiative to develop new servers based on low-power ARM and Atom chips, saying he expected such energy-sipping hardware to account for 15 per cent of the global market by 2015.

George Kadifa, executive VP of HP Software, said his division's main challenge would be integrating the various software outfits HP has acquired in recent years, including taking Autonomy – which cost HP a bundle in 2011 and has some analysts fearing another, EDS-style writedown in the near future – "from start-up to grown-up."

And last but not least, HP COO Bill Veghte delivered a status update on the company's Converged Cloud initiative, which HP says allows businesses "to build and consume all forms of cloud offerings." Veghte said HP brought in $4bn in cloudy revenue in 2012 and that he expects that figure to reach $8.4bn by 2015.

In all, Whitman said these changes should set the company aright, and that she expects HP's revenues to be growing in line with US gross domestic product by 2016. But if she hoped the markets would see Wednesday's pep rally as a sign of a positive future for HP, she was in for a disappointment.

Investors have generally viewed Whitman with skepticism, and despite her tough talk about a turnaround, HP shares have been in decline ever since she took the CEO seat last September. They plummeted another 13 per cent to close at $14.91 on Wednesday, their lowest point in almost ten years. ®

The Power of One Brief: Top reasons to choose HP BladeSystem

More from The Register

next story
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Amazon Reveals One Weird Trick: A Loss On Almost $20bn In Sales
Investors really hate it: Share price plunge as growth SLOWS in key AWS division
Bose says today is F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.