Whitman promises to steady HP ship in 2014
HP chief executive Meg Whitman expects revenue to stabilise in 2014 with “pockets of growth” before the business accelerates again in 2015.
Whitman’s comments to analysts at an annual investor briefing eased Wall Street’s concerns about her multiyear turnaround program. They helped the shares recoup some of their 20% loss since August, when the CEO warned that growth in 2014 would be unlikely.
“Fiscal 2014 will be a pivotal year,” she told analysts gathered in San Jose. “In fiscal 2015, you can still expect to see acceleration, and in fiscal 2016, an industry-leading company.”
Most of the comments were about growth opportunities rather than fixing holes in the ship
In 2014, “we expect total revenue to stabilise and start driving new pockets of growth.”
The company has earmarked more than $3 billion for research and development. There has also been progress generating cash flow and stabilising some parts of HP’s business such as Enterprise Services, Whitman said. The company generated a total of about $7 billion in free cash flow through the fiscal third quarter of 2013.
“Most of the comments were about growth opportunities rather than fixing holes in the ship,” said Patrick Moorhead, analyst at Moor Insights & Strategy, who attended the presentation. “Investors like that.”
Moorhead said some of the core fundamentals have also been stabilised.
“Services and software were the problem children last year,” he added.
Whitman, who took the helm of HP in 2011 after a failed bid to become governor of California, inherited a company ravaged by board shake-ups and executive departures, and a bureaucracy unable to respond quickly enough to changes in the industry.
Two years into what she has always described as a five-year effort, sales and profits are still sliding, and Wall Street is concerned Whitman may be running out of time. The company’s stock has lost more than half its value since 2010.
Whitman said that when she joined HP, operations were in disarray, with the sales team lacking modern tools and an information-technology infrastructure.
While HP’s massive but stagnant printer division has made money, the PC business has been contracting as more customers switch to tablets and mobile devices. Whitman wants to turn HP into a major player in the corporate technology services market, now dominated by Oracle, IBM and Cisco
“This time last year I was feeling HP was falling dangerously behind,” Whitman said. “Our business units lacked a clear, crisp integrated strategy. Our innovation pipeline was there but wasn’t being commercialised.”
“In 2013 we started to change that,” she added. “Our multiyear journey continues. I am comfortable with the progress we are making.”
Whitman, who has been known to take a hands-on approach with corporate customer, stressed again the need for a “maniacal focus” on engaging and listening to clients. “This year alone I met with close to 1,000 customers and partners,” Whitman said.
Underscoring the shifting IT landscape, Whitman acknowledged that HP’s traditional profitable segments – such as printing and PCs – were in decline and the company is in the process of transitioning to growing sectors such as storage, networking and other services to corporations.
“Over time these will become bigger revenue businesses and will overtake the declining businesses,” she said.