270 Days into Meg Whitman’s Tenure as CEO of Hewlett Packard

270 days into Meg Whitman’s tenure as CEO of Hewlett Packard and battleship HP is listing.  When interviewed by the Wall Street Journal June 26  about Hewlett Packard’s situation, CEO Meg Whitman replied, "Most turnarounds in American industry are anywhere between four and five years.  And we're at the beginning of the journey, not the end of the journey.  Ultimately, you will see the sales decline slow and start to grow again, with the caveat that our services businesses may be a smaller but more profitable business." 

The stock hit a one-year low of $16.24 on June 26.  This is even a 7 year low. Hewlett Packard’s  52 week high of $37.70 occurred last June. June 28 update - A new low of $19.12 was hit.

Some Recent Occurrences   

In a memo sent to channel partners (obtained by CRN) and signed by "The HP Channel Leadership Team,"  the channel was told that executives Scott Dunshire and Mike Parrottino are switching the roles within HP that they were assigned to only two months ago. 

  http://www.crn.com/news/data-center/240002591/hp-names-new-channel-leaders-searching-for-rauch-replacement.htm

 

The lawsuit over Hurd’s payout of $40 million by Hewlett Packard  was dismissed (this was good!) http://www.reuters.com/article/2012/06/22/us-hp-hurd-lawsuit-idUSBRE85L0XE20120622

 

The Oracle - HP court case still has not been settled.  It should be decided shortly.  http://www.eweek.com/c/a/IT-Infrastructure/HP-Oracle-Dispute-Over-Itanium-Now-in-Judges-Hands-473740/

 

HP announced that about 8,000 of the planned 9,000 of the layoffs  will be in the US.  Bad for the US.  She has announced that some of the cuts will be through attrition.  http://www.pcworld.com/businesscenter/article/258293/hp_to_trim_9000_jobs_in_us_as_part_of_costcutting_plan.html

 

Hewlett-Packard   released an open source version of WebOS that can be used on legacy TouchPad tablets on June 27.  This is good. Meg Whitman had talked about this soon after being named CEO.   http://www.computerworld.com/s/article/9228561/HP_releases_open_source_webOS_Community_Edition_for_TouchPads

 

"There is a lot of frustration and disappointment about what has happened" at HP, said J.P. Morgan analyst Mark Moskowitz, adding that the tech giant will have to demonstrate significant improvement within a year to reassure skittish shareholders.  http://www.mercurynews.com/business/ci_20908742/hp-hewlett-packard-long-term-turnaround-tests-investors-patience

There is not a lot of confidence within the channel or the marketplace.There has to be a rudder on this ship somewhere. Whitman has to explain how her actions fit into the big picture of a turnaround.  And the actions have to begin to affect positive change. Or she won't be around to celebrate her fifth or second anniversary of being named CEO.

Seminal Moment for Meg Whitman and Hewlett Packard http://kensek.blogspot.com/2012/05/seminal-moment-for-hewlett-packard-and.html

The Meg Whitman Era – Six Months In http://kensek.blogspot.com/2012/03/meg-whitman-era-at-hewlett-packard-six.html

 

Meg Whitman Era Begins at Hewlett Packard http://kensek.blogspot.com/2011/09/meg-whitman-era-begins-at-hewlett.html

 

Seminal Moment for Hewlett Packard and Meg Whitman – 27,000 Layoffs Announced

Let the restructuring begin.  ­ For the fiscal second quarter, ending  in April, Hewlett Packard’s profit before some costs fell to 98 cents a share, below  analysts’ 91-cent average estimate.  However, the sales decline of three percent to $30.7 billion topped   the average projection of $29.9 billion.

As part of the earnings announcement on Wednesday, HP stated that it plans a   27,000 workforce reduction (an 8% reduction) between now and October 2014.  This is the largest payroll purge in its 73-year history.  Annual savings from layoffs, retirements, and other measures, will be about $3.5 billion annually.  The job cuts and retirements will pare Hewlett-Packard’s workforce to  349,600.  Among Whitman’s foci for the coming turnaround, delivering the “right products, at the right price, at the right time.”

Many of the cuts will come from the   enterprise services group, which manages data centers and provides technology consulting. This group expanded when Hewlett Packard acquired Electronic Data Systems for $13.2 billion in 2008.  Services demand has slowed, and the division’s profitability has declined amid competition from companies such as International Business Machines Corp.

  "These are never fun but given where H-P is, these are necessarily to get the company back on track," Sterne Agee analyst Shaw Wu said.  During the reign of Bill Hewlett and Dave Packard, during one economic lull,   employees worked a 4-day workweek with a reduction in pay to maintain staff.  In today’s environment, even they may have had to go for layoffs. 

 “This is quite different from the cost-cutting that Mark Hurd undertook,” Whitman said in an interview.  “This is about fundamental business-process re-engineering.”

Meg Whitman   has said the company needs to make its products and services more competitive and spend more on research and product development.  Under some of her predecessors, Hurd, for example, R&D   suffered as cost cutting was the primary focus.  Brian Marshall, an analyst at ISI Group, said in a research note last month the company ought to spend $4 billion to $5 billion on R&D to compete with IBM and Cisco Systems Inc. in developing new products.  Hewlett Packard had been spending about $3.2 billion annually. 

When Whitman was named CEO in September, HP’s stock was at about $22.80.  It closed on Wednesday at $23.03 and had reached a peak of $29.89 on February 16.  During Whitman’s tenure, NASDAQ has gone up by about 15%.  Not a lot can be read into this, however.

A Brief Timeline of Whitman’s Tenure to Date

• Aug. 18: HP announces it will discontinue its tablet computer and smartphone products and may sell or spin off its PC division.
• Sept. 23: HP fires Apotheker after just 11 months and replaces him with Meg Whitman
• Oct. 27: HP says it will keep the PC division after all. 
• Dec. 9: HP says that instead of selling its WebOS mobile system or killing it off, it will make it available as open-source software that anyone can use and modify freely.  HP says it still plans to develop and support WebOS
• Feb. 22, 2012: Whitman urges investors to be patient and talks of a "multiyear journey" for a turnaround. 
• March 21: HP says it will combine its PC and printers businesses.  The move will save an unspecified amount of money.   
• April 11: Estimates from research groups Gartner and IDC suggest that HP has regained much of the PC business it had lost during the period of indecision.  Now about those tablets they sold for $99 when they said that they were thinking of discontinuing that business….

There will be uncertainty over the next few months as Whitman and had team decide in more detail where the cuts will be during this restructuring.  About a third of them will be in the United States.  The analysts will probably in general  be positive with the move.  Layoffs and reinvesting in R&D is nothing new.  These are typical turnaround Bain type activities, where both Whitman (and Romney), spent part of their careers.   

Nothing   has been said how acquisitions may play a role in the turnaround. While R&D will increase, growth via acquisition can make sense for certain deals to get into a business or plug a gap in a product line quickly. Part of Apotheker’s demise was his decision to (way) overpay for the Autonomy acquisition.  Hewlett Packard had been investing more heavily in security and making security acquisitions.  This will continue.

When Whitman accepted the CEO position,   she moved out of the “executive offices” and into a cubicle on the floor with other employees.  This is more in keeping with the culture that Bill Hewlett and Dave Packard had for the company. You didn’t see this during the Carly Fiorina era.

Meg Whitman isn’t getting a huge salary for her efforts.    In a recent filing with the Securities and Exchange Commission HP wrote that  Whitman received a salary of $1, about $16.1 million in stock options, and $372,598 in "other compensation," including use of the company aircraft.

 

http://www.bloomberg.com/news/2012-05-23/hp-third-quarter-forecast-misses-estimate-27-000-jobs-to-be-cut.html

 

http://kensek.blogspot.com/2012/03/meg-whitman-era-at-hewlett-packard-six.html