Speeding our journey to a successful turnaround

Highlights of the Q3 FY13 earnings announcement and market perceptions

When CEO Meg Whitman announced HP’s Q3 FY13 earnings results on Wednesday, she provided an update on the company’s five-year turnaround strategy.

 

“Parts of the business like Printing, Enterprise Services, Converged Storage and Software are making progress, while others have not completely turned the corner,” she told employees in a video message, adding that she is “very encouraged by the innovations coming out of HP.”

 

In addition, HP continued to make progress rebuilding its balance sheet. “We lowered the operating company net debt by $1.7 billion,” said Meg. “This represents our sixth consecutive quarter of reducing our operating company net debt by more than $1 billion.  This is great progress!”

 

Despite these positive results, parts of HP still “simply have to improve,” said Meg. The contraction of the market for PCs is still impacting Personal Systems, and revenue in the HP Enterprise Group was down nine percent over the prior year. Meg called the business’s performance “disappointing.”

 

In order to accelerate progress, Meg announced changes at the executive level. Bill Veghte will assume the role of executive vice president and general manager of the Enterprise Group, while Dave Donatelli will take on a new role focused on identifying early-stage technology companies that can help HP develop future server, storage and networking solutions. 

 

In addition, Henry Gomez will take on the new combined role of chief marketing and communications officer, while Marty Homlish will become HP’s chief customer experience officer.

 

“I’m confident that the changes we announced today will speed our journey to a successful turnaround,” said Meg.

 

Nevertheless, she told investors during HP’s Q3 earnings conference call that HP has reset its expectations for FY14. “Particularly given the challenges in the Enterprise Group and Personal Systems, as well as the fact that 2013 revenue from key accounts in Enterprise Services is running off more slowly than anticipated, we now expect that total company year-over-year revenue growth in fiscal 2014 is unlikely,” she said.

Reaction from media

Reaction from the press was mixed.

 

“Quarterly results from computing giant Hewlett-Packard just crossed the wires, and they’re close, but not close enough to what Wall Street had wanted to see,” reported All Things Digital.

 

“Hewlett-Packard made a profit in the latest quarter, reversing a huge loss a year ago that stemmed from an $8 billion charge. But the technology bellwether’s revenue declined amid weakness in the PC market that shows no signs of easing,” said the Associated Press.

Finishing the year strong

 

Meg told investors, “I remain confident that we are making progress in our turnaround. We are already seeing significant improvement in our operations. We are successfully rebuilding our balance sheet. Our cost structure is more closely aligned with our revenue, and we have reignited innovation at HP, with a focus on the customer.”

 

In a video message to employees she said, “I can’t emphasize this enough, we have to keep at it. We need to finish the year strong.”