Hewlett Packard - The Adventure Continues for HP and CEO Meg Whitman

For Hewlett Packard and CEO Meg Whitman, there is never a dull moment.    Board Chairman Ray Lane was essentially given a vote of no confidence by shareholders and has relinquished his chair position.  . John Hammergren, who has been on the board since 2005, and former Wachovia CEO G. Kennedy Thompson, a director since 2006, will resign, as well.  The three could perhaps offer themselves as a package deal for Dancing with the Stars.

All three have   been on the board for much of Hewlett Packard’s precipitous decline in stock price.  There for Autonomy.  There for the  tablet debacle.  You really can’t  really  blame the board for these, in some respects.  External smartest guys in the room and others in the Hewlett Packard organization did make the recommendations. 

After hitting a 52-week low of $11.25, that stock has gone up to $20.66.  This is still substantially below the just under $45 they were trading at a couple of years ago.  On a percentage basis, the Dow has increased about 20% and Dell has decreased about 10% over the same period.

So, what is HP going to do?  Meg Whitman is still saying recovery will be a four-year process.  Hewlett Packard has been investing in security as part of their strategy.  Tablets were revived from coaster status to being part of the strategic mix. Smart phones may be part of the mix in 2014.   Last week, as part of project Moonshot, Hewlett Packard introduced a line-up of super servers.  These are designed to appeal to the biggest social-media, cloud-computing, and e-commerce sites.

Autonomy is going to continue to be part of HP.  Even after the massive writedown.  "We remain committed to Autonomy; we remain committed to the brand, to Cambridge, to the U.K.," she said at a  recent news conference.   "It is an almost magical technology. ... It plays into a big shift in the market, the area of Big Data, which HP should be in."  Bets are being taken as to who will ultimately be thrown under the bus for the analysis of this deal and from which side of the pond.   http://www.denverpost.com/business/ci_22999671/hewlett-packard-ceo-meg-whitman-remains-committed-autonomy

 

The laptop/PC business won’t drive a recovery.  Printer sales and ink revenue won’t increase if laptop/PC sales tank.  According to IDC, laptop/PC sales dropped over 11% in Q1 versus the same period in 2012. For HP, the drop was 24%.  Windows 8 sales have not been astronomical, as well. 

The takeoff in tablets has sucked the growth out of PC and laptop sales.  Tablets will   out-ship desktop PCs this year, according to IDC.  They are also forecasting that by the end of 2013, desktop PC shipments will dip 4.3 percent.  Tablet shipments will rise to 190 million units, an annual growth rate of 48.7 percent, according to the firm.

Whitman was named CEO in September 2011, replacing Leo Apotheker.  “The pressure is on Meg,” stated Toni Sacconaghi, an analyst with Bernstein Research.  A housecleaning of the board “bought her a year.” according to an April article in the New York Times.  More bold moves are needed by Hewlett Packard and Whitman.  Going private (unlike what Dell is trying to do) isn’t an option.

Whitman and Hewlett Packard need to make even more aggressive  moves.   

http://www.datamation.com/mobile-wireless/tablets-to-surpass-desktop-pcs-this-year-idc.html

 

http://www.forbes.com/sites/connieguglielmo/2013/04/04/hewlett-packards-board-continues-to-deliver-drama-as-chairman-lane-steps-down/

“Hewlett Packard and Meg Whitman – The First Year.  Turbulence and Turmoil in the Valley” at

http://kensek.blogspot.com/2012/09/hewlett-packard-and-meg-whitman-first.html

Hewlett Packard to Expand Razor Product Line

Whoops, I meant their printer product line.  This expansion could  generate a fair amount of ink cartridge revenue for Hewlett Packard, as well.  "We haven't had a new product lineup in seven years," said HP CEO Meg Whitman in talking about Hewlett Packard’s plan to announce a new line of printers.  "It was very obvious that we had a product gap here."

Hewlett Packard will be introducing multi-function machines that combine printers with scanners and software to manage electronic documents.  The software will come from their Autonomy group.  The rumored price point, around $2500 to $3000, and targeted at small businesses and groups within larger companies.

In IDC's  “MarketScape: U.S. Shared, Networked Multifunction Peripherals for the Distributed Office 2012 Vendor Analysis” (Doc # 235820).  Companies in the Leaders quadrant include Xerox, Rico, HP, and Canon.  Konica/Minolta are close behind as Major Players.  IDC’s quadrant displays a company’s market share graphed against Capabilities and Strategies.  The Capabilities score measures vendor product, go-to-market and business execution in the short-term.  The Strategy score measures alignment of vendor strategies with customer requirements in a three to five year timeframe. Whitman's announcement will help keep HP in this section of the quadrant.

This announcement may portend good things for Todd Bradley,  head of HP’s printer and personal-computer businesses.  The printing unit has brought in over $25 billion in revenues to HP. Under the Hurd regime, R&D  suffered, dropping from  $3.7 billion to $3 billion between 2003 and 2010.  More will be spent under the Whitman regime.

Whitman also telegraphed some of her other strategies for the next couple of years  while speaking at the Gartner US Symposium/Txpo, held in Orlando.  She stated that HP would probably not release a smartphone until 2014.  She also expects HP to be a major contender in the tablet and mobile PC markets.

“There will be ups and downs in this business," Whitman said.  "PCs may be declining.  Tablets may be growing.  The business definition here is 'personal systems.’  It's not PCs.  It's personal systems.  And we think we can win.”  Whitman didn’t comment on which OS the smartphones will use.

Hewlett Packard’s stock decline has been steeper than the double diamond ski  runs at Squaw Valley in Lake Tahoe, California.  On October 26, the stock hit another 52-week low of $13.94.  This represents a 52-week decline of around 50%.  Competitor Dell has had a slide of almost 45% over the same period and also had another 52-week low of $9.19.

Whitman and Hewlett Packard need to make some bold moves.  She  said when she became CEO   that turning Hewlett Packard around would be a multi-year effort.  She’s now just into her second year at the helm.  There may not be a third if things don’t start improving.

“Hewlett Packard and Meg Whitman – The First Year. Turbulence and Turmoil in the Valley” at

http://kensek.blogspot.com/2012/09/hewlett-packard-and-meg-whitman-first.html

Hewlett Packard and Meg Whitman – The First Year. Turbulence and Turmoil in the Valley

The first year of Meg Whitman’s tenure at Hewlett Packard has not been fun.  Challenging?  Yes.  The company hit a 52-week low of $16.23,   in late September.  Its 52-week high of $30 was in mid February.  When Whitman took the reins of the company in September of last year, the stock was trading at just under $23.  So investors have seen the value of the stock decline of about 30% during year one.

Whitman gets a C- for year one.  Revenue, earnings, stock price, market share are all down.  Many proper decisions to turn the company around are taking place.  The numbers are not there yet.  Whitman stated when she took over the reins that this would be a multi-year project.

According to SF Gate,  Whitman is betting that refining the company's existing strategy, rather than making radical shifts, will help reverse the company’s troubles. 

Dell has been suffering over the same timeframe.  From September 22 to September 28:

• Nasdaq – up about 28%
• Dow Jones – up about 26%.
• Hewlett Packard - down about 25%
• Dell – down about 29%

With the exception of March and April, Hewlett Packard and Dell have been trending downward at about the same rate. Click on the graphic to enlarge it.

The big day will be October 3, when Whitman discusses her strategy for HP at an analyst conference.

Some Brief Observations

Autonomy - Autonomy has been a disaster for Hewlett Packard over the last year.  Jefferies analyst Peter Misek is advising investors to sell HP's stock, but is warning that HP could be heading for another huge write-off, of around $3 billion.  http://www.businessinsider.com/analyst-says-hp-may-write-off-3-billion-2012-9

The 27k layoffs –   Layoffs, retirement, attrition.  This is good for the company, ultimately. 

Continuing to lose laptop market share to Dell and Lenovo – bad.  Its share of PCs dropped to 14.9 percent in the second quarter, while Lenovo's share has increased to 14.7 percent, according to Gartner.

September introduction of “Stylish and Affordable Consumer and Business PCs”   and hoping to “Help Businesses Maximize Productivity with Powerful New AMD-based PCs” – HP is trying their hardest to reverse the loss of market share.  

Introduction of new entry-level, web-connected Designjet ePrinters - They are betting that some people will always need to be printing.  Betting on the razor blade strategy here. 

HP also had a September introduction of what they are calling the industry’s first web-connected, entry-level printing solutions for architecture, engineering and construction (AEC) students and professionals.  This strategy is to make   in-house, large-format printing accessible to more users.

The trend towards people printing less from their laptops/desktops – bad.  Cartridges are one of Hewlett Packard’s razor blades.

Announced intention to offer a mobile phone – bad.  This is a crowded market.  Hewlett Packard will be a late entrant.  "We have to ultimately offer a smartphone because in many countries of the world that is your first computing device.  You know, there will be countries around the world where people may never own a tablet, or a PC, or a desktop.  They will do everything on the smartphone.  We're a computing company; we have to take advantage of that form factor," Whitman said, according to a transcript. 

http://www.mercurynews.com/business/ci_21543699/hewlett-packard-developing-smartphone-ceo-meg-whitman-says

 

The on again, off again tablet -   Mixed thoughts on this.  An HP tablet may be successful only as a niche product.  They are late.  The market is crowded.  This means downward pressure on prices and margins unless HP comes up with something unique. 

Spinning off Web OS into Gram - If it is going to be successful, this was probably the only way to do it.

Additional security solutions announced in September – Excellent.  HP is betting heavily on security.  In a down market, companies slow their investment in security, they do not slash it. This included new features to HP Assured Identity, Security Operations Consulting services, a new release of ArcSight Enterprise Security Manager.  They also announced   the introduction of the HP TippingPoint NX Platform Next Generation Intrusion Prevention Systems (NGIPS).  I don’t know about that last acronym! Back to the conference room for the naming committee.

New virtualization solutions announced in August at VMWorld – Very good.  They announced that they were expanding their HP Converged Cloud portfolio with new solutions for VMware vCloud® Suite 5.1.  This is a growth sector, regardless of the different definitions people are using for "cloud".

Revenue/earnings - Bad.  Four consecutive bad quarters. Enough press.  Enough said. 

Look for major articles on Hewlett Packard, October 4.  This is the day after the analyst meeting.

http://www.sfgate.com/technology/article/Meg-Whitman-to-sharpen-HP-business-focus-3887883.php