HP Earnings Outlook Clouds, Stock Price Declines
October 4, 2012 8:37 AM
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HP expects good news in fiscal 2014
HP was once one of the most profitable and stable companies in the technology and computer industry. The company's fortunes have changed as more consumers move away from traditional desktop and notebook computers to
tablets and smartphones
. HP CEO Meg Whitman issued a warning yesterday of an unexpectedly severe decline in earnings for fiscal 2013.
The announcement warned investors and analysts that revenue would fall in every single HP division except software. The decline in revenue sent shares in HP plunging to a nine-year low. Whitman has been banking on transforming HP into a significant player in the enterprise computing environment to take on both IBM and Dell.
Analysts on Wall Street hoped for better signs of progress on Whitman's plan to turn the ailing computer giant around. Whitman told investors that signs of recovery for HP would become visible in fiscal 2014 when the company's investments begin to pay off. Blame is placed on an unexpected executive turnover during the past several years as a reason for delaying the turnaround at HP.
"I was surprised that nothing new was really said in terms of strategy, and the problem here is there is lack of investor confidence in the current strategy," said Shaw Wu, an analyst with Sterne Agee.
HP CEO Meg Whitman [Image Source: Silicon Angle]
On Wednesday, HP's stock price declined by 13% marking the largest single-day decline since August of 2011. HP's enterprise services division is looking at a particularly dark outlook. Revenue from HP's enterprise services division is expected to decline between 11 and 13% for fiscal 2013 while barely turning a profit. Reuters reports that operating margins for the enterprise services division will be somewhere in the range of 0 to 3%.
"The single biggest challenge facing Hewlett-Packard has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices, and frankly some significant executional miscues," Whitman told the investor conference in San Francisco.
"This is important because as a result it is going to take longer to right this ship than any of us would like," she added.
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10/4/2012 12:27:58 PM
Why did they spend billions of dollars to purchase EDS? Why did they buy Palm? Why did they buy Autonomy?
Hurd's aggressive cost-cutting, including company-wide pay cuts and years of salary freezes drove off all their best workers, especially at HPES (formerly EDS), and the company has been floundering for years.
They purchased Palm just as they were starting to show potential, and then immediately axed all of Palm's plans.
The company's top executives have been looting the company for *years* at this point.
10/4/2012 1:32:15 PM
HP bought EDS because one of its main goals was to become the leader in the IT Services business sector, an industry that has long been dominated by rival IBM.
Yeah I agree, the acquisitions of Autonomy and Palm seemed a bit overambitious but those purchases were obviously during a time of HP upper management changes and turmoil.
I'm not denying that aggressive cost-cutting will eliminate top-level talent but it's also not impossible to rise from the ashes as we have seen with the success of Ghosn, Mulally, and Welch.
10/5/2012 2:43:07 AM
Palm was bought because HP was pushing its printer platform and wanted an OS. Palm was a great buy, giving HP an OS they could use to add more features to their printers.
It was also during the start of the smart phone craze. By purchasing Palm HP would have what it needed to compete with the other heavy weights like Apple. Unlike most Android developers, HP has patents covering a meriade of mobile device technologies. If Apple sued for a GUI element HP could remove the element easily and hit back with a fundamental mobile device patent.
HP was doing pretty well until they brought that idiot from SAP. What I cannot figure out is why the board let him run for so long before cutting him. The guy had run SAP into the ground, they picked him up and he trashes Palm (despite the price premium HP payed for the company) and tried to trash the hardware side of things. This basically would have left HP with printers and business software. SAP was business software, he ran them into the ground, how could the board not see what was going on?
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