The Meg Whitman Era at HP Begins With a Conference Call (Audio)
Whitman made her first pronouncements to the public and to the HP rank and file on a conference call today, along with Chairman — newly named executive chairman — Ray Lane. I recorded the call and pulled out some highlights you can hear below, courtesy of SoundCloud.
The decision to oust now former CEO Léo Apotheker was made after the board of directors observed “operational weaknesses” in his management. “It became increasingly clear that we needed new leadership to focus on operating our business more effectively to meet the challenges of today’s environment,” Lane said. “The board believes that the job of CEO requires additional attributes to successfully execute on the company’s strategic evolution.”
Whitman admitted that HP hasn’t been delivering the kind of results that investors have come to expect. “We’re not happy about it,” she said, promising that HP will have no higher priority than to get HP’s operations back on track. Her first public comments as CEO are in the audio clip below:
The news of Whitman’s hiring as the new CEO obfuscated some comments from CFO Cathie Lesjak, who warned that HP may have another tough quarterly earnings report ahead. Blaming soft market conditions in Europe and from government agencies, Lesjak said HP will likely meet its per-share guidance issued on Aug. 18, non-GAAP earnings of $1.12 to $1.16 a share. However, she said she feels “less certainty with regard to revenue,” specifically around hardware sales. HP had forecast revenues in the range of $32.1 billion to $32.5 billion.
I’ve talked with sources familiar with retail PC sales, who tell me that the back-to-school season was pretty good in terms of the number of machines sold, but that PC manufacturers, including HP, had to slash prices aggressively to keep consumers interested and buying. That may turn out to be a contributing factor.
Another key factor will be commercial PC sales. Since HP started talking about spinning off its PC business on Aug. 18, some of its commercial customers have been acting on their uncertainty by holding back on new deals or buying from other vendors like Dell. CIOs hate uncertainty, and HP has been playing defense with many of its biggest customers since the announcement, seeking to reassure them that they can still do business with HP.
Whitman’s hiring has brought a lot of criticism that she doesn’t have sufficient experience running a large, enterprise-focused technology company. Lane defended the choice by saying that during her years running eBay, she was a big buyer of enterprise technology and that the experience should serve her well.
Why not conduct an extensive search, considering candidates from both inside and out? Toni Sacconaghi, author of last week’s stinging research report about “exasperated” HP investors, asked about that. The implication was that HP’s board of directors had acted impulsively in hiring Apotheker last year and was doing so again in hiring Whitman. Lane reminded Sacconaghi that HP’s board has eight new members since those days, so it’s not the same group of people involved with the Hurd resignation and the Apotheker hiring. Hear his answer below:
And yet, despite having sent Apotheker to the exit, HP still intends to follow through, in broad brushstrokes, with the strategy he laid out. HP is still studying what to do with its Personal Systems Group, the unit that sells PCs to consumers and businesses. All options — a spinoff or no action at all — are still on the table. But as Whitman says here, in response to a question from Keith Bachman of BMO Capital, “That decision is not going to get better with age,” so the sooner it’s done, the better.
Lane, asked by analyst Shannon Cross of Cross Research about the timeline of the decision to let Apotheker go, said the decision wasn’t made suddenly, but over the course of the last few quarters. After missing earnings forecasts for two quarters in a row, and with the communications mess that occurred on Aug. 18, it became clear, Lane said, that Léo had to go. Hear him explain it below: