HP’s Meg Whitman Sees Light At The End Of Tunnel

HP CEO Meg Whitman has pleased Wall Street with her relatively upbeat assessment of the company’s prospects going forward.

Whitman was speaking at an investor day on Wednesday, and her comments pushed HP’s share price up nearly 10 percent to close at $22.60 (£14.18) on the New York Stock Exchange.

The share price rise was welcome news for HP investors, although the current price is some way off the $27.30 (£17.13) it was trading at in mid-August.

Turning A Corner?

Despite this, there is no doubt that Wall Street was pleased with Whitman’s forecast as she provided investors and analysts with an update on the turnaround process at the company during its so called “fix and rebuild” year.

Whitman also offered up a pleasing 2014 fiscal outlook prediction, coupled with a pledge to return at least 50 percent of fiscal 2014 free cash flow to shareholders through dividends and share repurchases, a move always sure to appease Wall Street.

Whitman told the meeting that the multi-year turnaround at HP remains broadly on track. She also pointed out that HP has met or exceeded quarterly non-GAAP diluted earnings per share (EPS) outlook since the turnaround plan began through Q3 of fiscal 2013.

Looking ahead, Whitman expects free cash flow to approach $8 billion (£5bn) by the end of FY13. She said that HP has also reduced its operating net debt by almost $8 billion over the past 12 months, approaching a goal of zero. And she committed the company to smarter innovation, with research and development (R&D) spending expected to be in excess of $3 billion (£1.9bn) in fiscal 2013. Whitman also reiterated that she expects HP’s revenues to grow in line with gross domestic product (GDP) over the long term.

“While there is a lot more work to be done, I am confident about the progress we are making,” said Whitman. “We’re producing tangible results, strengthening our balance sheet and delivering innovative products across all our key segments. We are implementing the changes needed to support our multi-year turnaround journey, reaffirm HP’s leadership position, and create enduring value for customers as well as for our shareholders.”

Friends Like These

Whitman admitted HP is facing challenges to adapt to the post-PC world. The scale of the challenge here was underlined by the recent PC shipment figures from analyst houses IDC and Gartner, both of which said that PC shipments in the third quarter had declined once again.

And it seems that the sorry state of the PC market is reportedly turning former friends and allies against each other. Microsoft is known for example to have upset some of its OEM partners, with the arrival of its Surface tablets.

“Current [HP] partners like Intel and Microsoft are turning from partners to outright competitors,” Whitman reportedly said during the meeting.

Meanwhile HP’s executive chief financial officer Cathie Lesjak told the analyst meeting that the company expects “the year-over-year revenue decline in fiscal 2014 will moderate from fiscal 2013.” HP also anticipates operating profit dollars to be flat to up year-over-year in fiscal 2014, due to its continued focus on cost savings and operational efficiency.

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