Meg Whitman's HP Earnings report card: What's working, what's not
On an earnings call Tuesday, Hewlett Packard (HPQ) CEO Meg Whitman announced, “I am excited to say that HP’s turnaround continues on track.”
Wall Street though, had a different opinion. While HP met the street’s estimates on bottom line earnings, it missed on key revenue targets which sent the stock lower in after hours trading.
“She was asked about 2015 when she’s promised revenue growth and she was sort of beating around the bush about it. So I don’t know when you’re going to see some expansion at HP,” said Yahoo Finance’s Aaron Pressman.
Complicating all of this, perhaps, is HP’s planned split next year. Investors are breaking down revenue numbers to see how each planned stand alone will fair on its own.
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One arm of the new company will comprise the PC and printer business, the other arm will be HP enterprise services.
“The enterprise side was supposed to be the big growth side,” said Pressman. “But there’s so much competition and all of HP's peers are feeling this. IBM (IBM) is feeling this, Oracle (ORCL) is feeling this. They’re feeling it from all the new competitors and, different kind of competitors that are offering services on the cloud in a cheaper way. It’s not clear that there’s a lot of growth on the growth side of HP,” he added.
The silver lining may be the PC arm of the company, once written off as dead by an industry woo-ed by the promise of tablets and mobile computing. “The old PC business, which they were going to dump in the garbage, revenue was up 4% mostly on laptop sales. Every other line of the business: the printers, the servers, the services, the software, was down this quarter.”
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The catch, though, is that PC growth is not promising in the long term. According to a new IDC study cited by Pressman, the PC market is still in decline – it’s just declining less this year and next year (2.7% and 3.7% respectively) than it has been. Purchases in the PC market have been driven largely by companies updating their employees’ computers, rather than by consumers, according to Pressman.
So with all that in mind, is Meg Whitman’s grand turnaround plan for the company working? Yes and no.
“Meg Whitman’s turnaround has two parts,” said pressman. “One part was to get the house in order, pay down debt, cut expenses. And that part is going gangbusters, it’s still going gangbusters.”
The other part of the plan was growth and that’s where we get into the problems outlined by the earnings report. “[Her plan is to] find some new markets, get into the cloud, re-design servers. None of that is working,” said Pressman.
Still, Wall Street doesn’t seem to have given up on her. After all, the company’s stock is up under her tenure at the company. “She has a plan, which people like. To move, to focus on high growth areas like cloud Internet services, 3D printing, other sexy things, [like] a very high class of servers. And she needs to execute on those,” said Pressman. “It’s still not clear whether there’s real substance to these initiatives or whether they’re just mostly being talked up.”
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