Why Whitman, Industry Analysts See HP Ship Righting Itself

 
 
By Chris Preimesberger  |  Posted 2013-10-09 Email Print this article Print
 
 
 
 
 
 
 

NEWS ANALYSIS: HP hasn't improved by merely supervising more sales and overseeing the production of better products. Cutbacks are also a major factor.

Straightening up a listing ship as bulky as Hewlett-Packard would be an immense challenge for even the most talented corporate turnaround expert. However, after only two years on the job in a sector of the IT industry in which she had little experience, Meg Whitman appears to be accomplishing just that.

The iconic IT company's stock gained more than 9 percent in value Oct. 9 in after-hours trading after the CEO declared during the company's annual analyst day on its Palo Alto, Calif. campus that the company's financial picture was finally stable following nearly a decade of setbacks. HPQ stock was selling at $22.60 late Oct. 9 after opening at $20.77.

To be sure, Whitman, the former CEO of eBay, hasn't done this merely by supervising more sales and overseeing the production of better products. That certainly is part of the answer, but Whitman also has had to be the heavy quite often and mix in cost cutting--mostly through job and project cutbacks--to move the company into the improved position it now has.

Picture Was a Lot Different a Year Ago

Twelve months ago, in outlining a five-year turnaround plan to these same analysts, Whitman had a very different outlook.

"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 commercialized. But now I am comfortable with the progress we are making."

Playing the heavy meant that Whitman has had to trim nearly 23,000 of HP's 332,000 employees since she replaced an embattled and overmatched Dr. Leo Apotheker as CEO in September 2011.

If she sticks to her five-year plan, HP still has about 6,000 more jobs to trim.

Acquisition Strategy, Execution Must Improve

Another thing HP must improve is its acquisition strategy and process. The company admittedly has made some questionable--and very expensive--moves in the last decade that have brought more problems than solutions.

The multibillion-dollar additions of Compaq, EDS and Autonomy have forced the company to take more than $20 billion in charges for problems associated with those companies--including accounting discrepancies with all three companies.

None of those deals came on Whitman's watch as CEO, so she can approach those divisions inside the company with more objectivity than some other longtime HP executives.

What Three Analysts Say About All This

eWEEK asked three respected IT business analysts about their takes on how Whitman has done in her 24 months in charge.

"Overall, I'd say that Whitman has done a good job of restoring credibility and financial discipline to a company that had been worn down by Mark Hurd and whipsawed by Leo Apotheker," Hayward, Calif.-based Pund-IT chief analyst Charles King told eWEEK.

"In part, she accomplished that by making difficult and/or unpopular decisions, including killing non-performing businesses and admitting the failure of expensive past acquisitions."

However, the road ahead doesn't look especially easy for her, King said.

"HP's new style of IT looms a bit long in the tooth compared to competitors who have logged more time and gained greater credibility with similar efforts," he said. "But at least it's a start, and given the overall success of Whitman's HP efforts, the company's shareholders, customers and employees likely feel they have reason for hope."

Moor Insights & Strategy President Patrick Moorhead told eWEEK that he believes "Whitman delivered on her promises over the last 12 months as she has stabilized software and services to the point where HP can focus on growth areas.

"HP projected growth with its Converged Cloud [product line], but enterprise infrastructure and PCs will be a challenge, specifically consumer," Moorhead said.

"HP really needs to find a way to capture the hearts and minds of the consumers like they did under Carly's [Fiorina] regime, but I didn't see a plan today that accomplished that."

To that end, HP is now coming out with all-new laptops, notebooks, desktops and tablet PCs that appear to be much-improved over previous devices.

"She [Whitman] has consistently beat the Street [in the quarterly reports], and in comparing how the company was a year ago, they are acting more like a team and far less like a group of individual players which I think is important," Enderle Group chief Rob Enderle remarked to eWEEK.

"Last year they seemed to be struggling to understand what was wrong; this year they articulated not only a clear idea of the problems [both internal and external] but credible plans to address them. That's a significant difference in a year, and suddenly HP appears to be a company already well on the way to being mended."

 
 
 
 
Chris Preimesberger

Chris Preimesberger is Editor of Features & Analysis at eWEEK. Twitter: @editingwhiz

 
 
 
 
 
 
 
 
 

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