Arik Hesseldahl

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HP’s Whitman Sees 2014 as a “Pivotal Year” in Turnaround Effort

meg_whitman_apjHewlett-Packard CEO Meg Whitman sounded a cautiously optimistic note in a speech before financial analysts in San Jose, Calif., today.

Calling the forthcoming 2014 fiscal year “pivotal,” Whitman steered away from providing much in the way of specific financial guidance. That’s coming later from CFO Cathie Lesjak. But Whitman did say she expects that revenue will stabilize in the coming year. Previously, she had said that 2014 would be the first year of meaningful growth.

She also specifically called out Microsoft and Intel — longtime partners supplying chips and operating systems for PCs and servers — as partners who are becoming competitors. It’s worth noting that earlier this week HP announced a notebook running Google’s Android operating system.

HP shares rallied by $1.32, or more than six percent, on Whitman’s comments, to $22.05 a share as of 12:15 pm ET.

Below is AllThingsD’s liveblog coverage of Whitman’s remarks:

8:43 am: And we’re live. With about 15 minutes to go before the proceedings begin, we’re being treated to some peppy instrumental music.

8:03 am: Okay, the program is getting under way. First up is Rob Binns, who is taking care of housekeeping. Agendas and such.

CEO Meg Whitman will speak first. Cathie Lesjak will speak at the end of the day, which means the guidance will come later in the day. Wonder if that means bad news?

8:07 am: Whitman is now speaking.

Whitman: I want to talk about fiscal 2013, and about how we’ve done year to date versus our outlook given last year.

I want to talk about where we’re headed, and how each of the businesses fit together.

Whitman: The turnaround plan is “broadly on track.”

Whitman: Last year, I mapped out a five-year journey for turning HP. Now I can confidently say that we’re making real progress.

Whitman: In short, last year at this time, I felt that HP was falling dangerously behind.

Whitman: We generated about $7 billion in free cash flow in the first three quarters, well ahead of forecast. We’ve lowered our operating company net debt by nearly $8 billion.

Whitman: While I would love for us to be at the end of this journey, I am comfortable with the efforts we are making.

We stabilized our enterprise services businesses. We had very serious execution challenges. Under Mike Nefkens and JJ Charhone, we have stabilized that business.

Whitman: After 2014, we are not going to do another big restructuring.

In Q3 we lowered our cash-conversion cycle to just 18 days. We thought it would be 24 to 26 days, so we’ve done better. By the end of 1H-2013, we had already met our full-year cash flow projection.

Whitman: We’ve made critical moves to bolster the senior leadership team, including the promotions of Bill Veghte to head of Enterprise Group, Dion Weisler at Printing and Personal Systems, and Martin Fink as CTO and head of HP Labs.

Whitman is now running through a bunch of recent hires to different business units.

Whitman: Operating company net debt is now below pre-Autonomy levels. We can now make investments to grow our business.

8:17 am: When I arrived as CEO, basic instrumentation and operating cadence did not exist, for a company of HP’s size and complexity. We’ve had to build a lot of it.

Whitman: This year alone, I’ve personally met with more than 1,000 customers and partners.

Whitman: R&D spending is expected to be $3 billion. Now she’s showing a video about what’s happening on the innovation front. It’s the Nascar video that HP showed at HP Discover.

Actually it only started with the Nascar bit.

Whitman is now back onstage. She’s revisiting her whole argument that there’s a big, fundamental shift taking place in the IT market — the “new style of IT,” that she talks about often.

From the beginning of time, all of humanity created five exabytes of information. Now we create that amount of information in five hours.

Whitman: Only HP has the ability to deliver across the full spectrum of IT solutions the market is going to demand.

Whitman: I want to talk about our growth. She’s going to hit some highlights.

In the Enterprise Group, it’s all about “converged infrastructure.” It’s our phrase, and it combines servers, storage and networking.

We’re excited about our next generation of blade servers and Moonshot. Now she’s talking about 3Par, the storage product. In networking, we’re the No. 2 player, and we do it at a lower cost. (A little shot at Cisco there.)

Now it’s on to software, including mentions of Vertica and Autonomy. And now something new, called Haven, a big-data analytics platform.

8:32 am: Whitman: This group of products and services is how I see HP moving to growth. The reality is that today we have a lot of declining businesses. So we have to manage that transition from the declining business to the growing businesses. … In time, the new businesses will overtake the declining businesses.

Whitman: We have to aggressively invest in the new businesses. We’ve got to continue to nurture them with the appropriate investments. And we also have to work to maintain our flat businesses. (Like printing.) Then we have to manage the decline of the businesses profitably, and optimize their profitability.

Whitman: We have much more work to do. We have to overcome some challenges, and we have to take advantage of some opportunities.

Whitman: HP’s traditional, highly profitable markets face significant disruption. Wintel devices are being challenged by ARM-based devices. Printing remains flat despite the growth of devices in use.

Whitman: The disruptive forces are very tough and very real, and they are accelerating.

Whitman: We are seeing profound changes in the competitive landscape. Our competitors are expanding across the IT stack. Current partners like Intel and Microsoft are turning from partners to outright competitors. (Interesting name-checking there.)

Now she’s talking about customers. United Airlines. Its infrastructure needs to be running 24 hours. We run and operate all these mission-critical systems for United.

We treat United like it is our only customer, and that is what we must do with every customer.

I am still not pleased that we missed too many opportunities. We are doing a much better job of connecting to our customers and listening to what they need.

I don’t think we have always done a good job on this.

Whitman: We have to up our game substantially. We have been too insular for too long. This has cost us with our customers, and it has cost us with our partners.

Example: Recently, a CIO of a major corporation told me when we show up, we show up late with solutions. He already has three emails from three competitors who have already scheduled meetings. We’re often late to the game. We have to fix that.

Whitman: We’re going to make real progress on this in 2014. We have worked through a process to identify where we’re going to place.

We’ve identified the most profitable 40 country-category pairs. We’ve identified the top 30 innovations that hold the most promise for 2014 and beyond. And 15 of the most promising growth markets.

Whitman: We expect to see better, faster commercialization of innovation in 2014. We expect total revenue to stabilize and drive real pockets of growth.

She’s winding up and getting ready to close. Fiscal 2014 will be a pivotal year. I feel confident that we have the right strategy and the right set of assets. I see a new sense of spirit and determination. A will to win. Our customers want us to win.

In fiscal 2015, you can still expect to see acceleration, and in fiscal 2016, an industry-leading company. We expect the results of our efforts will create enduring value for our shareholders.

Whitman is through speaking now. Not a lot in the way of specifics. The guidance, which last year came from Cathie Lesjak right after Whitman’s remarks, is coming after lunch.

8:53 am: My guess — and I should emphasize that it’s only a guess — is that, despite Whitman’s optimistic long-term outlook, that the in-the-trenches guidance for 2014 isn’t going to be good. They don’t want Lesjak’s remarks and the guidance to be a distraction from the rest of the day’s presentations.

With that, I’ll wrap this liveblog and return with another one when Lesjak comes to the stage. Thanks for tuning in.


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