AllThingsD » Cathie Lesjak

The Aircraft Carrier Hewlett-Packard Begins Its Turn (Video)

Arik Hesseldahl — Thu, 24 May 2012 15:55:21 +0000

Shares of Hewlett-Packard are heading up this morning on the heels of yesterday’s chock-full report, which included earnings that beat expectations and details of a restructuring plan that will see the company slash about 27,000 jobs over two years.

HP shares rose nearly 5 percent to $22.10, up $1.02 as of 11:15 am ET. Investors appear to be showing new confidence in HP and how CEO Meg Whitman is running the show. All the announcements that HP made yesterday bear repeating, because it was a busy afternoon:

The company says it plans to eliminate 27,000 jobs — about 8 percent of its work force — over two years, as part of a restructuring plan it says will help save between $3 billion and $3.5 billion in annual operating costs. The savings will be reinvested in growth areas of the IT business like cloud computing and services, and in a renewed focus on research and development. About 9,000 — or roughly a third — of the cuts will occur this year. Another batch — AllThingsD has been told the number is about 5,000 — will occur by way of voluntary retirement packages offered in the U.S.

HP reported quarterly earnings that beat the street’s expectations. While profits fell year on year by more than 30 percent, non-GAAP per-share earnings at 98 cents beat the 91-cent consensus handily. Sales also came in ahead of expectations at $30.7 billion and beat the consensus by $800 million — though that, too, was a decline of 3 percent. It was the third quarter in a row that HP has recorded year-on-year sales declines.

Mike Lynch, head of Autonomy, the British company for which HP paid nearly $12 billion last year, is leaving the company. Whitman talked about “disappointing results” at that unit, and complained in an appearance on CNBC this morning that Autonomy’s team was unable to close deals that HP had brought to the unit. Lynch, you’ll recall, is Autonomy’s founder, and was present at a pair of disputed meetings with senior executives of Oracle, at which the company may or may not have been shopping itself. Or just talking about databases in a lively fashion.

Here’s an interesting detail: HP is evaluating the carrying value of the Compaq brand name. Remember, of course, that HP acquired the PC maker Compaq way back in 2002. That deal ultimately made HP the PC-making powerhouse that it is today, but also had a lot to do with the downfall of Carly Fiorina, the company’s CEO from 1999 until 2005. The plan is to use the Compaq brand in a “more targeted” manner, CFO Cathie Lesjak said, and so HP will take a $1.2 billion impairment charge to write down the value of the name. One wonders if the letter Q might eventually come out of the ticker symbol “HPQ” on the New York Stock Exchange, and that it might revert back to the old ~~“HP”~~ “HWP” from before the 2002 acquisition.

Update: A few readers have written to point out I was wrong about HP’s old ticker symbol. It wasn’t HP but HWP. Silly me. Even so, if the Compaq name is headed for some lesser level of importance in HP’s future, then perhaps the Q in the ticker symbol, which was added as a nod to Compaq’s old symbol CPQ, to give the impression that the combination was more a merger of equals, should go. Given the choice between them, I would vote for HP. I should stress that I have zero indications that this is even under consideration, and is really just me ruminating.

Analysts had a mixed view. Chris Whitmore of Deutsche Bank Securities has been one of the more skeptical voices on HP’s turnaround prospects. “New sheriff, old game plan,” was the headline on his note to clients today. “We remain cautious on HP’s weak fundamentals, challenging macro conditions and deteriorating cash flow,” he wrote. Despite the beat on earnings, free cash flow — at $1.4 billion in the quarter — declined by half, pointing to what Whitmore calls “very poor earnings quality.” He rates HP as a “sell,” with a $20 price target.

Brent Bracelin of Pacific Crest Securities wrote that he remains unconvinced that an unexpected strength in HP’s PC unit is sustainable. “Apple and Samsung now account for 39 percent of market share across PCs, tablets and smartphones, and have a volume advantage relative to HP’s 6 percent share,” he wrote in a note to clients this morning. He rates the shares “market perform,” or neutral, and worries that HP’s biggest problem is that about half its sales are still tied to PCs and printers.

Whitman took to CNBC this morning to talk about HP’s situation. She portrayed the turnaround under way as about “10 to 15 percent” complete. That means there’s still a lot of work to do ahead. “We’ve laid a lot of pipe and done a lot of groundwork,” Whitman told the network’s anchors in a 13-minute appearance. I’ve embedded it below:

HP's Whitman: "We Are in the Early Stages of What We Hope to Achieve Here"

Arik Hesseldahl — Wed, 23 May 2012 20:53:35 +0000

So the news is out. HP will cut about 27,000 jobs over the next two years or so.

I’m joining HP’s conference call a little late — there was a lot of news to get through in the press releases and regulatory filings. As I’m typing, CFO Cathie Lesjak is running through the financial results. But the all-important Q&A with analysts is still ahead.

1:54 pm: Lesjak is talking about the results in the personal systems group. Consumer revenues declined 4 percent, while commercial sales of PCs increased 3 percent.

Services delivered 11.4 percent of sales, which was down. IT outsourcing revenue was down 3 percent as “we are being more selective in the deals we pursue.”

Technology Services revenue was flat. Imaging and printing revenue was down 10 percent and supplies revenue was down 12 percent.

Business Critical systems are down 23 percent year over year. Business continues to be impacted by continued revenue decline. That’s the Itanium lawsuit with Oracle hurting HP again.

Software revenue grew 22 percent to $907 million. Still too small to have a significant impact.

2:00 pm: Lead generation we are seeing across HP for Autonomy, but the company seems to be having a harder time closing deals on time.

Now on to the balance sheet: Our focus is to rebuild the balance sheet this year. We returned $350 million to shareholders via share repurchases. We also paid $251 million in dividend. $2.5 billion in operating cash flow and free cash flow of $1.5 billion. Total cash was $8.7 billion.

Lesjak is still speaking. She’s now getting into details on the restructuring. 9,000 employees will exit the company this year.

That amounts to about one third of the cuts to come this year.

We will be investing in technology and business processes. We expect to invest savings from headcount and non-headcount actions in a lot of things like cloud, software and services.

Non-GAAP fiscal EPS to be $4.05 to $4.10.

2:05 pm: Expect cash impact to be about $400 million in fiscal. Hm. This is interesting. HP is writing-down the value of the Compaq trade name it acquired in 2002. Does this mean the end of Compaq as a brand?

Here’s the Q&A. First from Katy Huberty of Morgan Stanley: Regarding free cash flow, the second quarter numbers were strong. Where do you expect free cash flow to end this year?

Lesjak: We haven’t been guiding cash flow. The way to think about it long term is that it trends in line with non-GAAP earnings. In Fiscal 2012 we expect $400 million and through 2014 we expect it to be $2.7 billion.

Huberty: Do you have a view yet if share gains in PCs were “sell out” or “sell in” after hard drive shortages?

Meg Whitman: We saw a good sell out in channel inventory. We feel pretty good in demand. We’ve struck the balance between design and the workhorse design that companies and governments need.

Bill Shope of Goldman Sachs: Can we return to mid-teens margins in IPG?

Whitman: We expect about 2 billion pages that will move from analog to digital. People at home are printing fewer photos, but we feel good about printing in the enterprise. As an industry leader we need to step up and act like one. We need to get pricing correct on ink and printers, and get the right product at the right time. In the enterprise we missed a cycle on multifunction color printers. And we have to look at business models in emerging markets. If you price the printer a little higher and the ink a little lower, you can sell a lot more printers and print a lot more pages. I think we’ve got the past four years really clear now.

Lesjak: On supplies decline. The vast majority of the decline was due to channel inventories this quarter. We expect that to modulate going into Q3. The caveat is that demand continued to be fairly weak. We’d like to take the inventories down a little in Q3.

Shope: Question on margins.

Lesjak: Go back to what drove the margins. One was supplies mix. This was caused by channel inventory corrections, but also softer demand and lower margins. Finally something we are not calling for a change, its the strength of the yen in our Laserjet business.

Whitman: Joining forces of IPG and PC business is going very well. PSG had a broader footprint in emerging markets. We’re going to leverage that. These were different divisions that didn’t coordinate as well as they could have.

2:13 pm: Toni Sacconaghi from Sanford Bernstein: I know you stated several times that you expect savings to be reinvested. If we take that literally and say 40 percent will drop to the bottom line, is that the right framework we should be thinking about? Is that the envisions balance given that you used the adjective majority?

Whitman: We have a well defined amount we’re going to get from headcount reductions. But there are other things: We are not to the point where we can make a decision about how much of that we can reinvest. We want to take a disciplined approach and evaluate return on invested capital. For example, we may get a lot of these savings. We’re only going to reinvest on those opportunities that make sense for HP long term. We’ll give more guidance on this at the end of Quarters Three and Four.

Toni: Your guidance. Even if you strip out the initial 5-10 cents from the guidance, it still implies a 30 percent Q3 to Q4 EPS growth, which is unprecedented. He’s basically trying to calibrate EPS expectations given the cuts.

Lesjak: The math we’ve done is that Q4 is in line with normal seasonality. We’re feeling like this is consistent with normal seasonality.

Toni: What are the offsetting forces?

Whitman: Overall we feel cautiously optimistic coming out of Q2. But we haven’t turned the corner. We are in the early stages of what we hope to achieve in the next few years.

We are in the early stages of a turnaround. They’re not linear. There may be a setback. And then we’re going through a lot of changes here. IPG and PSG are joined. There’s a lot of moving parts, but I don’t want to get out over my skis in terms of what we can deliver.

Lesjak is now talking about currencies. At the end of the day the currency we’re looking at right now is a headwind.

2:19 pm: Shannon Cross from Cross Research: Provide more color on how you are thinking of restructuring. Cuts across the board? Will there be any divestitures? More investments in back-office systems?

Whitman: Our restructuring is about three things. Align cost structure with the portfolio, (missed one thing), and then streamline operating model. Basically say, what do we want to focus on, how many people do we need to deliver. We came up with a bottoms-up approach to the cost savings we can achieve.

Then we have to make investments in the business. That includes back office tools and processes. We combined sales under John Hinshaw. We’ve put tools in. Once we do that you’ll see this company be a lot easier place to work.

Cross is asking about Autonomy. As we reported earlier: Mike Lynch is out.

Whitman: Autonomy delivered disappointing results. It’s not the product and its not competition. This is classic entrepreneurial company scaling issues. When you see a company scale like that it’s a whole different ball game. We need a new organizational structure to support a $1 billion+ company. This is something I’ve done before, having scaled eBay from $4 million to $8 billion, I’ve seen this movie before. I feel good about the product. I feel good about big data and analytics and it will hit all our business units.

2:23 pm: Brian Marshall of ISI: He’s asking about savings from cuts and how they will be reinvested. His question is breaking up a little in my audio.

Whitman: We’re looking toward organic innovation. We don’t see any major acquisitions on the horizon. There may be some tuck-in deals. The heritage of HP is a fantastic engineering culture.

We are going to increase the Research and Development budget considerably. We’re going to invest in product quality. We have good quality, but I think we can do better. And we’ve got some investment in internal systems.

Lesjak: We expect to save on an annualized run rate of $3 billion. It is from that pool of savings that we’ll be looking for reinvestment. That vast majority will be reinvested back into the business in places where we can grow.

2:27 pm: Question from Keith Bachman of BMO: First on services. You’ve ID’d that you want to take a number of people yet at the same time, there are areas in services especially where you need to nurture. How do you see headcount there?

Lesjak: What we’re doing is having a transition. It’s going from heavily weighted in slower growth to faster growing higher margin services. Cloud. Security, information management and analytics, and application modernization. As we do that, it has headcount implications. We’ve modeled that out a few years. I think it’s also important that this is a mix. But it’s not just about mix, including lean methodologies, so we get a better rate basis on contracts.

Bachmann: Net, you need to add people in services. Is the headcount up or down?

Whitman: I believe we will have a smaller more profitable services business.

2:32 pm: Next question from Ben Reitzes of Barclays. Asking Meg about China. You said things are turning around there. Also, a point about demand for PCs.

Whitman: I don’t want to get out over my skis concerning China. But it is doing better. We have a new head of APJ. We feel better about the distribution system there. We are seeing positive signs of a stabilization and turnaround. We announced our new line in China for a reason. I feel good about it, but it’s early days. But as you know, it has been a tough road for HP in China.

Lesjak: In industry standard servers in China, we are doing well. We are doing well there in networking.

Whitman: We have a fledgling but growing services business in China.

Now on to end-user demand for PCs. There is demand and there is a refresh coming from Windows 8. We still worry about Europe. My personal prediction is that Europe will get softer before it gets better.

2:35 pm: Whitman is wrapping up now. We have not turned the corner, but we have made real progress. We are excited about continuing to execute over the next quarter and years.

And that’s the end of the conference call. I’ll be back with some additional comments and color in a few minutes at the top of this post.

HP's Whitman to Announce Restructuring Plan Wednesday; 30,000 Jobs Targeted

Arik Hesseldahl — Thu, 17 May 2012 18:13:15 +0000

The daunting task of restructuring Hewlett-Packard will begin in earnest next Wednesday when the company reports its quarterly earnings. Sources familiar with the company’s plans say that CEO Meg Whitman will discuss the opening steps of a company-wide restructuring plan that will include the elimination of about 30,000 jobs.

A report by Business Insider yesterday pegged the range of cuts at HP to between 10 percent and 15 percent of its current work force of 320,000 people. But sources familiar with HP’s plans tell AllThingsD that the cuts will be carried out over a relatively long period of time, perhaps a year or more. A report by Bloomberg News out minutes ago puts the target at 25,000. The exact number of cuts, one source told me, is still considered a “moving target” and could grow or shrink.

Additionally, sources say, Whitman will, during a conference call with analysts, portray the cuts as necessary — not to bolster HP’s earnings and satisfy shareholders, but rather as a means to make needed investments. On this point, Whitman will be borrowing a bit from the playbook of her short-lived predecessor, former HP CEO Léo Apotheker.

Whitman will argue that many of the cuts made at HP during the five years that Mark Hurd was at its helm were made without corresponding investments in new and growing initiatives. This “cut and reinvest” theme will apply across the company, sources tell me. The process has been an intense one among HP’s senior executive ranks and has, as one source put it, “consumed the company.”

Much like what happened at networking giant Cisco Systems, the restructuring will include a combination of voluntary retirement packages, the precise details of which are still under consideration, combined with outright cuts. The target for voluntary retirement, sources tell me, is about 5,000 people.

Brian Marshall, an analyst with ISI, in a May 3 note to clients estimated that a job reduction of about 18,000, amounting to about 5 percent of HP’s work force would, would save HP in the neighborhood of $1.2 billion and boost year-end earnings per share by about 50 cents, assuming a cost of about $100,000 per employee. “If HP institutes a reduction in force as we expect, we wouldn’t be surprised if calendar year 2013 EPS estimates eventually approach $5.00 as the business stabilizes, growth returns in the Jan 2013 quarter and the organization is streamlined,” Marshall wrote.

Exclusive: The HP Reorg Internal Memo

Arik Hesseldahl — Sat, 24 Mar 2012 02:14:48 +0000

Now that Hewlett-Packard CEO Meg Whitman has ordered the company’s printing group and personal computers group to recombine — undoing the separation forced upon them in 2005 — the group’s boss, Todd Bradley, has wasted no time in putting his team in place.

Below is an internal HP memo sent to company employees on Friday. In it, Bradley names every key executive who will be responsible for running the new Printing and Personal Systems Group (PPS), which will essentially replace the existing Personal Systems Group (PSG) and the Imaging and Printing Group (IPG).

As previously reported, this business unit will be, by at least one key measure, the new big dog at HP. Based on 2011 sales, the combined group is responsible for $65 billion — more than 51 percent of HP’s overall sales. Yet the two groups are flailing: HP’s PC business is under attack, if for no other reason than the fact that prior CEO Léo Apotheker sought to spin it out and thus created some damaging uncertainty for the group’s longer-term prospects. Then there’s the little matter of Apple’s iPad and other tablets, a market segment where HP has no presence to speak of as yet.

The printing business, on the other hand, was once the financial engine that kept other bits of HP afloat. While printers are generally sold at a loss, ink cartridges and other supplies have been sold at much higher profit margins than other goods. The problem is that people are printing a lot less than they used to — and are showing the photos that they once printed on iPads and tablets, instead.

Anyway, Bradley’s team is listed in detail, below:

SUBJECT/ Organization announcement

TO/ All Printing and Personal Systems employees

March 23, 2012

HP Restricted – For Internal Use Only

As Meg said this week, this realignment is designed to make it easier for you to service customers, sell HP and make it easier for you to get work done.

In Printing and Personal Systems, this mission will be our passion and our focus, and we will lead from a position of strength. We are the global leader in printing and personal systems, and we have touched hundreds of millions of lives along the way. Now, as one team, we can accelerate our path to profitable growth while we deliver the best experience to more people.

Together, we are a $65 billion powerhouse with tens of thousands of employees around the world. But we haven’t reached our full potential. To accelerate our progress, we must act swiftly.

With this in mind, I am pleased to announce the best leadership team in the industry.

Global Business Units

Each of our four GBUs is accountable for product development and long term business results, working closely with the region and function teams. This begins with understanding customer insights, designing quality into our products upfront and delivering innovation that really matters to customers. These teams will work to provide a “better together” customer experience. The four GBUs are:

· Personal Computers led by James Mouton

· Inkjet and Web Solutions led by Stephen Nigro

· LaserJet and Enterprise Solutions led by Ron Coughlin. Mike Salfity and the platform development team will be hosted within Ron’s organization.

· Graphics Solutions led by Chris Morgan

Regions

To reach our potential we need to make it easier for our customers to buy from us, and for our sales teams to serve them. Together as one team, we have a clear opportunity to simplify and improve how we work with channel partners, drive market preference and expand our sales coverage.

Given the size and scope of PPS in the U.S., I have decided to create a new role within the traditional Americas region structure that is focused exclusively on our U.S. business. In all regions, collaboration is key during this transition to ensure we deliver on the fiscal year.

· Americas led by John Solomon. Within the Americas, Lynn Pendergrass will lead the U.S. Stephen DiFranco’s role will be announced at a later date. Meanwhile, Stephen will work with John and Lynn to ensure an orderly transition.

· Europe, Middle East and Africa led by Eric Cador. Bill DeLacy’s role will be announced at a later date. Meanwhile, Bill will work with Eric to ensure an orderly transition.

· Asia Pacific and Japan led by Dion Weisler. John Solomon will collaborate with Dion during the transition.

PPS Global Functions

Our functions are also closely aligning to help us will drive a more integrated and simplified approach to how we work. Again, collaboration will be key during the transition.

· Customer Service & Support led by Enrique Lores. Bruce Dahlgren will report into Enrique, leading Managed Enterprise Solutions.

· Operations led by Tony Prophet; Reinhard Winkler’s role will be announced at a later date. Meanwhile, Reinhard will work with Tony to ensure an orderly transition.

· Sales Operations and Project Management Office led by Joshua Brenkel

· EVP executive assistants are Denise Polanco and Susan Bergstresser

HP Global Functions

In the spirit of “One HP,” the following leaders are assigned to PPS, reporting to the respective EVP of their function.

· Finance led by Jon Flaxman, reporting to Cathie Lesjak. JJ Charhon, as previously announced, will lead finance for Enterprise Services.

· Marketing led by Eric Keshin, reporting to Marty Homlish; Manny Kostas’ role will be announced at a later date. Meanwhile, Manny and Eric will work together to ensure an orderly transition, including working with Henry Gomez to identify the communications professionals who will move to Global Communications.

· Human Resources led by Teri Eyre; Nancy Phillips’ role will be announced at a later date. Meanwhile, Nancy will work with Teri to ensure an orderly transition. Both Teri and Nancy report to Tracy Keogh, HR.

· Legal led by Gabriel Buigas, reporting to David Healy

These appointments are effective May 1. In addition to welcoming this team to their new and expanded roles, please join me in recognizing the remarkable contributions of all of the leaders of the former PSG and IPG organizations.

My team and I will provide clarity on the rest of the management team as quickly as we can after a thoughtful talent review. We intend to announce L3 leaders by May 1, L4 leaders by June 1, and to have all roles in the new organization clarified by August 1.* I will also hold monthly communication sessions to keep you up to date on what’s happening and ensure your questions and concerns are heard.

This is a great deal of change for each of us. But we must meet commitments to our customers, to our partners and to each other. The true strength of our organization cannot be captured in a simple organization chart — it is defined by the people who make HP work.

Thank you in advance for helping to drive PPS and HP forward.

Todd

*For those countries that require consultation with works councils or other employee representatives, this is not intended to provide country-specific information and in no way reflects that final decisions have been made at a local level. With respect to such countries, final decisions are subject to prior consultation with works councils and other employee representatives, and compliance with local law.

Hewlett-Packard Names Marc Levine as Controller

Arik Hesseldahl — Fri, 23 Mar 2012 12:15:22 +0000

Hewlett-Packard today named Marc Levine as its new controller, effective May 1. Levine is a 24-year veteran of HP, and is currently senior vice president of Finance for HP Enterprise Services. His jobs within HP have included finance roles in its Global Sales unit, and in its old medical products group, which is now Agilent Technologies. Levine will report to CFO Cathie Lesjak, and replaces Jim Murrin, who has been appointed senior vice president and general manager of End-User Workplace and Managed Network Services in HP’s Enterprise Services group.

Whitman: HP's Turnaround Is a Multi-Year Journey That's Just Getting Started

Arik Hesseldahl — Wed, 22 Feb 2012 21:53:58 +0000

HP’s quarterly results are out, and the early judgment of investors is that it was a mixed bag. While per-share earnings at 92 cents beat the consensus of 87 cents, sales were light by about $700 million.

It was a tough quarter, which is something HP executives will likely remind us all about during the conference call that’s set to get under way any minute. There were challenges on every front, from the shortage of hard drives to the decline in demand for printers.

So what’s the plan now? Perhaps CEO Meg Whitman will give us a look at the year ahead. I’ll be listening in and reporting what I hear.

2:03 pm: Opening comments from Steve Feiler, head of investor relations. Meg and Cathie Lesjak will also be speaking.

The audio is a little off. Maybe Steve should sit a bit closer to the phone?

2:06 pm: And here’s Meg. We’ve been working hard to set the right tone and calm the waters. She’s been traveling the world, talking to HP employee and customers. Eighty customer visits. So what have I found? I have found some skepticism and some incredible support.

The more time I spend listening and learning, the more passionate and determined I become.

I want you to understand where we’re going and why. In Q1, our performance tracks pretty close to the expectations we set in November. That said, we met our guidance. It was a tough quarter, with troubles in every segment. With the supply challenges, we focused on profitability rather than volume.

Now on to the printer unit. All of you know IPG has been the lifeblood of our company for a long time. But we also have to recognize that the business is being pressured on multiple fronts. We have work to do here, and are working to rebuild IPG’s leadership.

Software is a critical part of our portfolio, and key to strategy. Autonomy acquisition is going well. We see synergies across all our businesses.

2:12 pm: Now on to the macroeconomic environment. The U.S. has some positive signs. Guarded about Europe.

In the six months I’ve been CEO, my perceptions of the business have changed. Her issues are in three buckets: One, simplicity. She’s talking about SKU reduction, which means reducing the number of models of different products. With that, Meg is taking a key page from the Steve Jobs playbook at Apple, circa 1997.

2:14 pm: The second bucket is investment. There’s another stab at prior management for not investing in key lines of business.

Our current cost base just isn’t supportable. We’ve been running our business in silos. It’s made us too costly and too slow. We need to standardize, optimize and automate many business processes.

We have got to save to invest. We have got to save to grow.

I have no doubt that we’ll turn HP around.

2:17 pm: And here’s CFO Cathie Lesjak running through the numbers. Half of the revenue decline came from hard drive shortages. We made the decision to prioritize profitability over volume. We expect the supply will remain constrained in Q2.

PSG reported $8.9 billion in sales, down 15 percent year on year. Shipments down 8 percent.

Wow, consumer PC sales down 25 percent. That’s gotta hurt. That’s part hard drive shortage, but also some damage taken by Apple and the iPad.

Lesjak is talking about the legal spat with Oracle. The uncertainty around the Itanium-based servers has hurt sales considerably and, as legal papers show, HP makes a lot of money servicing those servers.

Software is looking good generally, but it’s too small to make a dent in the weak results elsewhere.

2:26 pm: Lesjak: We remain cautious about consumer and business spending. Hard drives will remain a problem. We still have hard work to do to align inventory levels with demand.

The expected decline in revenue will impact margins.

Back to Meg: I’d really like you all to take away these three messages: We’re committed to clarity. Two, we’re getting back to basics. Three, we are building HP to last, focusing not on short-term expectations.

Time for Q&A with analysts: First question from Barclays. It seems like a tone change for the printer group. Last time, it sounded economic and not secular, this time it sounds like it’s secular. He’s also worried about reaching the $4 EPS guidance for the year.

Meg: In IPG, we face a number of challenges. It’s a more mature market. I’m convinced it relates to macroeconomic problem. The sell-through of ink is at low levels, and it’s not just our ink, but industrywide. We do see pockets in decline. Consumers are printing fewer photos. We’re steady as she goes. Going to think hard about accelerating new business to compensate for the loss in ink sales. Also, the headwinds from the Japanese yen will remain. It’s a terrific business, but we’ve got some work to do.

Lesjak is talking now about the guidance question. The usual seasonal pattern shows that the second half of the year is stronger than the first. We think the hard drive shortage will be largely over by the third quarter.

Lesjak: There’s also an inventory correction to work through that will be largely done in the second half. Also, Autonomy will start showing results in the second half.

Question from Goldman Sachs: When do you expect to return to a “steady state” in IPG? How should we think about steady state?

Lesjak: There are three impacts to IPG: We continue to see weak consumer demand. That’s a headwind for ink sales and what we expected. And then currency, and then there’s a channel inventory correction. We expect challenging demand, but without the same headwinds as in first half of the year.

Sanford Bernstein question: There’s evidence of significant share loss across all businesses. It doesn’t appear you’re ceding share to improve profitability, because the numbers don’t support it. The data points to a widespread lack of competitiveness. I know you’ve talked about stabilizing the business. What does that mean, and how do you get there?

Meg: We prioritized profitability. We made a decision to priortize profitable products and customers and regions. Reiterating, we hope to get through the hard drive shortage by the second half. We didn’t have the perfect match for the disk drives we needed. Those two business, I’m not worred about endemic share loss. If you look at some of our other business — printers and ink — takes me to three big challenges. I don’t know if it’s a widespread lack of competitives. Our own execution, turning orders into products faster than our competitors. We’re world-class in how we buy our components. Our systems and processes were underinvested. We have an enormous number of SKUs, which leads to complexity in support and in selling. Some of our competitors do some of those things better than we do.

Then the Business Unit leaders are working hard to lower their costs, bring new products to market. PSG has some great products coming up, and in ESSN, too. Each BU leader has to work on strategic challenges. We have got to make sure we own the tectonic plate shift. Cloud, information management and one other I didn’t catch (sorry).

2:40 pm: Lesjak: We shipped servers that were less richly configured as a result of the hard drive shortage.

Follow-up question: When you both mentioned this concept of stabilizing the business, what does that mean? Is that holding share, growing in absolute terms? How will investors know, and what is the time frame?

Meg: The first thing we have to do is stop the revenue decline. The second is, then we have to start growing revenue, you have to gain share in every single market. The unit cost is going down, and you have to sell more. I would hope that as we get through 2012, you’ll see revenue decline flatten out, and as we get into 2013, we’ll start to grow. It depends on how fast we can get after some of these challenges in the business. A lot of this is in our own hands.

Lesjak: We let you know what our outlook is, and we deliver to it.

Meg: If you look at companies who go through these turnarounds, these things are not done in less than two years, and often they take three to five years. You’ll see forward progress. We’ve got a journey ahead of us.

Morgan Stanley: How are you assuming Windows 8, Intel’s Romley chip and other things will help you stabilize the business?

Meg: We feel good about Windows 8. We have x86 products. We have good reviews on our first ultrathin product. The better Windows 8 is, the better off we are. We’re rooting for a great Windows 8 product. You have to remember that PSG is only a part of the entire portfolio.

Question from Raymond James: Why did HP have such a significant impact from hard drive shortage relative to competitors? What is it about the supply chain that is the biggest in the world that put HP at a disadvantage?

Meg: We focused on profitability versus share. It was a remarkably fluid situation. Matching drives you ordered with the models. We were not as effective as we needed to be. It showed us that we have some challenges in our supply chain. We’ve got to get better in taking an order and delivering a product.

2:47 pm: Meg: We were not as advantaged as I would have anticipated. I think we’re world-class at buying, but if you look at the whole thing, there’s some advantages we can get.

Cross Research: How are you interacting with your direct reports, and how are they breaking down the silos?

Meg: We actually are a team. We have a cadence and a rhythm in how we meet. I couldn’t be more pleased with how the team is working together. If you were to ask the senior team, it would be a pretty positive feedback versus previous management. One thing I’m working on is bringing the entire product portfolio to customers as one HP. Our biggest customers want to buy from one HP, and not from different segments. I think the executive council members say the relationship with the CEO is as good as its been.

Lesjak: We’ve moved out of offices and into cubes. We’ve spoken more frequently with Meg than we have in the entire year. More over-the-cube-wall quick discussions. (Wow, all the senior execs at HP work out of cubicles instead of offices?)

Missed an entire question there. I’ll catch the next one.

Meg: Talking about printer business. The yen is a real problem.

Cathie: If you look at the yen increase year over year, it’s like 7 percent. It has been increasing over the last couple of years. We’ve been able to absorb it when it just became too difficult to take the cost out fast enough to offset appreciation in the yen.

2:54 pm: Question about services investment. Where is the bottom in services margins?

Cathie: The performance we delivered was in line with the expectations we gave last quarter. Revenue was up 1 percent, or flat in constant currency. The services we put in that category are services around cloud and security. We are on this long-term turnaround, and we are making progress, but we did see some margin compression from contract renewal. Almost all contracts get renewed at lower prices. We’re making investments in processes and IT to increase our ability to take costs out of services quickly. If you look at the outlook for 2012, we expect margins will continue to be down.

Meg: The way you have to think about services, we are going through a multiyear turnaround. In services, we know what the problem is, we have a plan, but it’s not a quick fix. It goes back to the assets we acquired in 2008 (EDS), then ran right into 2009 and the global recession. This has to be our solution selling arm, but we have a multiyear journey ahead of us.

2:58 pm: Incidentally, as I’m typing, HP shares are down more than 1 percent after hours, and that’s after falling 1.4 percent during the regular session. The view of the market appears to be more negative than it was early on, when the mixed bag of numbers first hit the wires.

I missed Maynard Um’s question, however.

3:04 pm: One more question: One about streamlining processes and what it means for operating expenses. And a follow-up for Cathie about cash conversion levels.

Meg: We have a strategy that I’ve seen work many times before. We have to save so we can invest. We have to streamline processes, optimize the supply chain, reduce SKUs and rationalize the go-to-market. What never works is to keep your cost structure the same and layer investment over it. Stabilize declining revenues and gain share in the categories we can keep. This is what great leaders do.

Cathie: We pay our annual bonuses in Q1, we accrue the expense in the previous year. It’s typical that Q1 is a low cash-flow quarter.

Meg is wrapping up. She’s incredibly optimistic, but she and her team have a lot of work to do. And that’s it.

HP CEO Whitman Earned One Dollar Plus $16 Million in 2011

Arik Hesseldahl — Fri, 03 Feb 2012 15:27:02 +0000

Hewlett-Packard released its annual proxy statement this morning, which, among other things, gives a look at what its top five executives made last year. Here’s the rundown:

CEO Meg Whitman, who upon becoming CEO agreed to take an annual base salary of $1, received more than $16 million worth of stock awards. Add on another $372,598 in other compensation, and the total value of her package was north of $16.5 million. Much of that other compensation stemmed from the period when Whitman was a director on HP’s board, and before she was CEO.

Under her employment contract, Whitman received an option to purchase 1.9 million shares of HP stock at a strike price equal to the value of the share price on the date of the grant, and subject to vesting requirements over time. As of today, 1.9 million shares would be worth almost $55 million. Whitman, the filing says, was the only one among the company’s named executive officers to receive an options award during 2011.

The filing also shows that CFO Cathie Lesjak made a base salary of $825,000, plus $9.3 million in stock-based compensation, $679,000 in incentive pay and $101,500 in other compensation, for a total of more than $11 million.

Todd Bradley, executive vice president and head of the Personal Systems Group, the division that HP briefly considered spinning out last year, made a base salary of $850,000, plus $9.3 million in stock-based compensation. He received $464,457 in incentive pay, plus $105,000 in other compensation, for a total just shy of $10.7 million.

Vyomesh “VJ” Joshi, the executive president and head of the Imaging and Printing Group, got an $850,000 salary, too, and nearly $8 million in stock awards, plus $638,355 in incentive pay, for a total of $9.8 million.

Shane Robison, the former chief strategy officer who retired last year, received a base salary of $781,250, plus stock awards worth $7.6 million and $606,506 in incentive pay, for a total of $9 million.

Finally, we have a full accounting of what former CEO Léo Apotheker made for his 11 months of service at HP’s helm. The full amount was $30.4 million. The precise amount had been the subject of some guesswork based on less-than-complete HP filings made around the time of Apotheker’s departure. The filings netted for HP a dubious award for “Worst Footnote of the Year” over at Morningstar’s Footnoted blog. My best guess had been in the $28 million to $33 million range.

Apotheker’s compensation breaks down like so:

$1,152,770 in base salary.
A $6.4 million bonus, of which $4 million was a signing bonus when he joined HP, and $2.4 million paid under the terms of his separation agreement.
Stock awards worth $17,660,759.
$5.2 million in “other compensation.” Within that was $2.9 million in relocation expenses related to Apotheker’s move from France to California and back; $1.7 million in “miscellaneous,” the majority of which, as explained in a footnote, was a “reimbursement for foregone non-competition payments that would have otherwise been payable by his former employer,” which refers to the software company SAP, where Apotheker was co-CEO.
Another $25,000 representing his personal use of HP aircraft.

Yahoo's Bartz Also Gets Fired From Fortune's Powerful Women List, While HP's Whitman Gets Hired

Kara Swisher — Thu, 29 Sep 2011 19:48:47 +0000

Today, Fortune magazine released its annual “50 Most Powerful Women in Business” and, as usual, it had its share of tech execs on the list.

And off it, too — first and foremost being ousted Yahoo CEO Carol Bartz, who was jacked completely from her 2010 No. 10 rank. She was No. 8 in 2009.

In her place: Newly designated Hewlett-Packard CEO and former eBay CEO Meg Whitman grabbed the No. 9 spot.

Also on the list: fast-rising IBM sales, marketing and strategy exec Ginni Rometty at No. 7; Xerox CEO Ursula Burns at No. 8; Oracle President and CFO Safra Catz at No. 11; Facebook COO Sheryl Sandberg at No. 12; Google execs Susan Wojcicki and Marissa Mayer at No. 28 and No. 38, respectively; IBM North America GM Bridget Van Kralingen at No. 39; and Best Buy Americas President Shari Ballard.

Catz was the highest paid of the group, with $42.1 million in total 2010 compensation.

And also taken off this year: 2010 No. 14, HP’s Ann Livermore, who left her top job there, but still is on the tech giant’s board; 2010 No. 28 Cathie Lesjak, CFO of HP; 2010 No. 44 Lorrie Norrington, a former president at eBay; and Apple’s communications head Katie Cotton (she was robbed!), who was No. 50 in 2010.

The new list will be in the magazine on Monday, which is when a related conference will take place in Southern California. (I will also be in attendance there, along with other less powerful ladies.)

Whitman is scheduled to speak at the conference in the afternoon on Tuesday, October 4.

The Meg Whitman Era at HP Begins With a Conference Call (Audio)

Arik Hesseldahl — Thu, 22 Sep 2011 22:51:35 +0000

And just like that, Hewlett-Packard, one of the world’s biggest technology companies and a Silicon Valley and American corporate icon, has a new CEO: Meg Whitman.

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:

Meg Whitman’s First Public Comments as HP CEO by ahess247

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.

Raydefendsmeg by ahess247

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:

Why no search at HP? by ahess247

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.

Decisionpsc by ahess247

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:

Ray Lane: Help surround or replace? by ahess247

HP Analysts Like Losing Léo, Not Sold on Whitman as CEO

Arik Hesseldahl — Thu, 22 Sep 2011 16:59:29 +0000

So what do HP’s biggest drama critics — I mean analysts — think about the latest shakeup to hit that company?

It’s a mixed bag. While they all seem to agree that HP’s board is right to push out CEO Léo Apotheker, especially in light of the stock performance, a confused strategy and a jarring change in emphasis, none seem ready to endorse the ascendance of Meg Whitman, the former eBay CEO and current HP director, to that company’s top job. Yet like it or not, the HP board meeting that will make it all official is underway, and as AllThingsD has reported, Meg Whitman will be named HP’s CEO at the close of markets today.

Toni Sacconaghi of SanfordBernstein, the author of a widely circulated note last week describing how “exasperated” HP investors are, weighed in again. “We are not surprised by HP’s stock’s reaction yesterday, given that our conversations with shareholders and investors over the past month revealed a level of exasperation that we have not seen directed at HP or any other company in our universe in our 13 years following the sector,” he wrote in a note today.

He also slammed HP’s board. “Our conversations with major shareholders also indicate that they have been disgruntled with the board, given it has made and approved a series of decisions” — including the ouster of the prior CEO Mark Hurd, the Autonomy deal, the premature announcement of the PC-spinout — “that many shareholders believe were poor decisions and misaligned with their interests,” he wrote.

Nor is he a fan of the Whitman hiring. HP needs to search far and wide and also internally for another CEO, Sacconaghi says. “We would view any decision not to conduct a comprehensive search of internal and external candidates for a permanent CEO role as unsatisfactory and unnecessarily hasty,” he wrote. “We also believe that shareholder reaction to Whitman as a permanent CEO would be mixed.” He also thinks CFO Cathie Lesjak, notable for filling in as interim CEO during the Hurd-to-Apotheker transition, may be leaving.

Shaw Wu of Sterne Agee is pretty much in agreement with Sacconaghi. “Given the disappointing financial performance over the last few quarters and some questionable decision making including the high purchase price of Autonomy, handling of the spinoff of its PC operation, and abrupt shutdown of its webOS hardware business, we are frankly not surprised that a change is being considered,” he wrote in a note to clients today. “So far, investors and even some customers we have talked to don’t seem confident in where HPQ is heading so a change is likely needed.”

But he’s not sold on Whitman. “While we believe she has proven to be a very capable manager helping grow eBay from a start-up into one of the largest internet companies, we think an ideal candidate for HPQ should have extensive experience in the enterprise market. In addition, we believe expertise in supply chain management would be helpful as well.” He goes on to name a handful of insiders and outsiders he’d consider possible successors: Dave Donatelli, who runs HP’s enterprise business; Todd Bradley, who runs the personal systems group and would be a likely CEO of that unit if it’s spun out; Steve Mills, who runs software and hardware at IBM; and Gary Moore, the COO of Cisco Systems.

Wu also says it might be a good idea for HP to keep its PC unit after all is said and done. “We estimate the business generates $2 billion in operating income per year and is the second most profitable behind Apple,” he wrote. Also the PC business isn’t so bad when you think of it as being one and the same with the tablet market. He maintained a neutral rating on HP for now.

Lou Miscioscia of Collins Stewart isn’t encouraged by the shake-up, either. Many of HP’s problems aren’t necessarily Apotheker’s fault, he says in a note to clients issued today. And he’s not sold on Whitman, arguing that she’s never run so large a company as HP and has never run one focused on the enterprise before. He maintained a neutral rating.

And while a post-Apotheker HP may undo some of his decisions, like spinning off the PC business, one thing it probably can’t do is walk away from its $10 billion purchase of Autonomy Software, says Jeffries and Co. analyst Peter Misek. Corporate takeovers are governed by strict laws in the U.K., making it nearly impossible for HP to pull out of the deal now. He rates HP shares a buy.

More Securities Lawyers Circling HP

Arik Hesseldahl — Fri, 16 Sep 2011 15:00:31 +0000

One lawsuit has already been filed and more may be coming, as the number of securities law firms throwing their hats into the legal ring around Hewlett-Packard increases.

In the wake of a proposed class action lawsuit, filed Sept. 13 in the U.S. District Court for Central California (complaint below), four more law firms have said they are launching their own investigations of HP.

The latest came this morning, as Klayman & Toskes, a securities law firm, said it was investigating claims on behalf of shareholders who might be eligible to join the proposed class action. The other three firms that have made similar announcements are Holzer Holzer & Fistel; the Briscoe Law Firm, PLLC; and Powers Taylor, LLP.

In the suit filed Tuesday, an HP shareholder named Richard Gammel alleged that comments by CEO Léo Apotheker — concerning the company’s earnings expectations, the importance of its personal computer business and plans to move ahead with devices running the webOS operating system — gave a vastly different indication of actions HP took on Aug. 18, when it killed the webOS hardware business and announced plans to spin off the PC business and spend $10 billion to acquire Autonomy. Gammel is being represented by Robbins Geller Rudman & Dowd.

During a period starting in November 2010 and ending on August 18, the Gammel suit argues that HP highlighted its ownership of the webOS hardware and software as a key differentiating factor against competitors — “a defining aspect of the company’s value proposition” — and that HP represented to shareholders that webOS, as the “crown jewel” obtained in last year’s $1.2 billion acquisition of Palm, was going to play an integral role in HP’s strategy going forward.

Of course we all know what happened after August 18. HP shares cratered in the days that followed, and traded below $23 a share, down from about $32 days before.

Lawsuits by shareholders are a fairly common response to sudden price drops, especially when they result from the kind of jarring shift in strategic direction that HP decided to make. The trick — and it’s a tough one — is proving that Apotheker and other HP executives made public statements about the state of the business, knowing they were false. And many lawsuits like this get dismissed. HP will have the advantage of being able to argue that Palm was acquired under the previous CEO, Mark Hurd, now a president at Oracle, and that the webOS business wasn’t taking off as originally hoped. We know this much is true, as TouchPad sales proved to be lousy before a drastic price cut spurred demand.

gammelHPcomplaint

HP CFO Cathie Lesjak on webOS

Voices — Fri, 19 Aug 2011 05:00:51 +0000

Our intention was to solidify webOS as the clear No. 2 platform for tablets, but with such a young ecosystem and poorly received hardware we were unable to achieve our target.

Hewlett-Packard CFO Cathie Lesjak

HP Names Ex-SAP Chief Apotheker as CEO

John Paczkowski — Thu, 30 Sep 2010 20:20:41 +0000

Hewlett-Packard (HPQ) has finally named a new CEO, and, despite our prediction that it would choose an internal candidate like Todd Bradley or Anne Livermore, the company instead looked to an outsider.

On Thursday afternoon, HP named Léo Apotheker–former CEO of SAP (SAP)–as its new chief executive officer.

And, in a jab at Oracle–which hired former HP CEO Mark Hurd after his ouster–it tapped Ray Lane, a former president and COO at Oracle (ORCL), as its non-executive chairman of the board. Lane is currently a managing partner at VC powerhouse Kleiner Perkins Caufield & Byers.

Interesting choices. Particularly Apotheker, who was pushed out of SAP this past February after less than a year on the job. (He served as co-CEO with Henning Kagermann for a few years prior.)

Cathie Lesjak, who has been serving as interim CEO, will return to her previous role of CFO on November 1, when the new appointments become effective.

In a statement announcing the move, HP board member Robert Ryan said the company chose to hire Apotheker because he’s “a strategic thinker with a passion for technology, wide-reaching global experience, and proven operational discipline.”

At $40.80, HP shares are down about three percent on the news. Seems investors aren’t too keen on Apotheker’s appointment, even after weeks of leadership uncertainty.

Here’s the release:

Léo Apotheker Named CEO and President of HP

Ray Lane Joins HP as Non-Executive Chairman of the Board

PALO ALTO, Calif., Sept. 30, 2010–The Board of Directors of HP today announced the election of Léo Apotheker as Chief Executive Officer and President. Apotheker, who previously served as CEO of SAP, will also join HP’s Board of Directors. The Board also elected Ray Lane, Managing Partner at Kleiner Perkins Caufield & Byers, as a new member of the Board and designated him as non- executive Chairman. Both elections are effective November 1.

During Apotheker’s more than 20 years at SAP, he was a driving force in making it the largest business software applications company in the world. Apotheker helped develop and implement the most significant changes in SAP history. During his tenure, he transformed R&D and technology platforms and expanded business models and customer segments. Apotheker also helped lead SAP to 18 consecutive quarters of double-digit software revenue growth between 2004 and 2009.

Lane has served on the Board of Directors of more than 20 public and private companies and joined Kleiner Perkins in 2000. Previously, he served as President and Chief Operating Officer at Oracle Corporation. Earlier in his career, Lane also worked at Booz Allen Hamilton, EDS and IBM.

“Léo is a strategic thinker with a passion for technology, wide-reaching global experience and proven operational discipline–exactly what we were looking for in a CEO,” said Robert Ryan, lead independent director of the Board. “After more than two decades in the industry, he has a strong track record of driving technological innovation, building customer relationships and developing world- class teams.”

Ryan continued, “Léo has been a leader in anticipating the transformation taking place in our industry, and we believe he is uniquely positioned to help accelerate HP’s strategy. He has demonstrated success in the U.S. market and also has vast international experience – which will be a major asset as HP continues to expand globally, particularly in high-growth emerging markets. HP has the right assets and market positions, and now we have the best team to realize the company’s enormous potential.”

“HP has a powerful mix of businesses, products and services, one of the most innovative cultures in the industry, and an accomplished management team who have played a critical role in its success,” said Apotheker. “I am deeply honored to be joining the more than 300,000 dedicated HP employees.”

Apotheker continued, “Given HP’s diversified products and services, its financial strength, and its leadership position across markets, no other company is as well positioned to drive – and profit from – the revolutionary changes under way in the marketplace. As we move forward, HP will continue to be a valued partner with our customers as well as a fierce competitor. I look forward to working with the outstanding people at HP to write the next chapter in the company’s long and proud history.”

“I am excited to join the Board of this pioneering company, and look forward to working closely with Léo – and the rest of the Board and senior management team – as they capitalize on the changes taking place across the industry,” Lane said. “I have known and admired Léo for almost 20 years. He is ideally suited to build on HP’s strong foundation, leverage its many assets and keep the company at the forefront of innovation.”

Apotheker will succeed Cathie Lesjak, who was named interim CEO in August 2010. Lesjak, who has served as HP’s Chief Financial Officer since January 2007, remains CFO and continues to serve as a member of the Executive Council. Ryan said, “Cathie is and will continue to be an important part of HP. We are extremely fortunate to have one of the deepest, most talented senior management teams in the industry and to have someone of Cathie’s caliber lead HP during this interim period. On behalf of the entire Board, I would like to thank Cathie and our senior management team for maintaining HP’s focus on serving customers and continuing to execute our strategy.”

HP Says Many Good Candidates Are Willing to Follow Hurd

John Paczkowski — Wed, 08 Sep 2010 21:51:25 +0000

Hewlett-Packard’s search for a CEO to replace Mark Hurd is going better than expected. That’s the word from interim CEO Cathie Lesjak, who says the company’s executive search committee is knee-deep in a good pool of applicants. “We’ve been very pleased with the selection of candidates,” she said at the 2010 Citi Technology Conference today. “There was some worry that there wouldn’t be that many. That certainly hasn’t been the issue.”

A well-timed bit of reassurance for addled HP (HPQ) investors who can’t be feeling too good about Hurd’s new gig with HP partner and rival Oracle (ORCL).

Asked about the state of HP’s relationship with Oracle, Lesjak conceded that it was “strained,” but said she expects the two companies to patch things up sooner of later. “At the end of the day business will prevail,” she said. “Ultimately we’ll go back to being good partners.”

Hard to imagine, given the words the two companies have exchanged recently and their developing rivalry in the servers and storage systems market. We’ll see, I suppose.

Mark Hurd "Left HP in Great Shape" With "Winning Strategy"

John Paczkowski — Thu, 19 Aug 2010 21:15:13 +0000

How’s HP doing without former CEO Mark Hurd?

Just fine, apparently. Asked what sort of state Hurd left the company in during a media call Thursday afternoon, Cathie Lesjak, Hewlett Packard interim CEO, said it was good. “Mark Hurd left our organization with an extremely strong strategy and a talented management team that’s excited to execute on it,” she said. “He left HP in great shape. We think of ourselves as a team on a mission….When you have a winning strategy, I don’t see motivation to change it. It’s something we’ve been building for the last few years. It’s a well-thought-out strategy that’s working very well for us.”

Meanwhile …

Hurd on the Street: HP CEO Resigns After Sexual Harassment Inquiry

John Paczkowski — Fri, 06 Aug 2010 20:12:30 +0000

HP CEO Mark Hurd once advised, “Anytime you take a job, think to yourself what it would be like on your last day on the job, and what you’d like to say about your tenure on that day, and work your way backward.”

Bet he didn’t envision his last day quite this way.

Hewlett-Packard announced today that Hurd has resigned following an investigation into allegations of sexual harassment against him by a former company contractor. HP says the investigation found no violation of HP’s sexual harassment policy, though it did determine there were violations of its Standards of Business Conduct.

According to HP General Counsel Michael Holston, some inaccurate expense reports of Hurd’s revealed an undisclosed “close personal relationship” with a marketing contractor and “demonstrated a profound lack of judgment.”

So profound that Hurd couldn’t be allowed to remain in his position.

In a statement, Hurd said, “As the investigation progressed, I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career. After a number of discussions with members of the board, I will move aside and the board will search for new leadership. This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time. I want to stress that this in no way reflects on the operating performance or financial integrity of HP.”

Hurd’s resignation is effective immediately. He’s to be replaced on an interim basis by CFO and 24-year HP veteran Cathie Lesjak. Board members Marc Andreessen, Lawrence Babbio Jr., John Hammergren and Joel Hyatt are heading up the search for a permanent replacement.

Released in tandem with the announcement of Hurd’s departure, news that HP (HPQ) has raised its full-year outlook for revenue. “We thought it was important for people to appreciate that the announcement today has nothing to do with the operational performance of the company; it is all about Mark’s behavior and judgment,” Lesjak said during a conference call. “Mark…was a strong leader, but at the end of the day, he didn’t drive the initiatives. It was the organization.”

HP CEO Mark Hurd Resigns; CFO Cathie Lesjak Appointed Interim CEO

PALO ALTO, Calif., Aug 06, 2010 — HP (NYSE: HPQ) today announced that Chairman, Chief Executive Officer and President Mark Hurd has decided with the Board of Directors to resign his positions effective immediately.

The Board has appointed CFO Cathie Lesjak, 51, as CEO on an interim basis. Lesjak is a 24-year veteran of the company who has served as HP’s CFO and as a member of the company’s Executive Council since January 2007. She oversees all company financial matters and will retain her CFO responsibilities during the interim period.

Hurd’s decision was made following an investigation by outside legal counsel and the General Counsel’s Office, overseen by the Board, of the facts and circumstances surrounding a claim of sexual harassment against Hurd and HP by a former contractor to HP. The investigation determined there was no violation of HP’s sexual harassment policy, but did find violations of HP’s Standards of Business Conduct.

A Search Committee of the Board of Directors has been created, consisting of Marc L. Andreessen, Lawrence T. Babbio, Jr., John H. Hammergren, and Joel Z. Hyatt, which will oversee the process for the identification and selection of a new CEO and Board Chair. HP’s lead independent director, Robert Ryan, will continue in that position.

Hurd said: “As the investigation progressed, I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career. After a number of discussions with members of the board, I will move aside and the board will search for new leadership. This is a painful decision for me to make after five years at HP, but I believe it would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time. I want to stress that this in no way reflects on the operating performance or financial integrity of HP.”

“The corporation is exceptionally well positioned strategically,” Hurd continued. “HP has an extremely talented executive team supported by a dedicated and customer focused work force. I expect that the company will continue to be successful in the future.”

Robert Ryan, lead independent director of the Board, said: “The board deliberated extensively on this matter. It recognizes the considerable value that Mark has contributed to HP over the past five years in establishing us as a leader in the industry. He has worked tirelessly to improve the value of HP, and we greatly appreciate his efforts. He is leaving this company in the hands of a very talented team of executives. This departure was not related in any way to the company’s operational performance or financial condition, both of which remain strong. The board recognizes that this change in leadership is unexpected news for everyone associated with HP, but we have strong leaders driving our businesses, and strong teams of employees driving performance.”

“The scale, global reach, broad portfolio, financial strength and, very importantly, the depth and talent of the HP team are sustainable advantages that uniquely position the company for the future,” said Lesjak. “I accept the position of interim CEO with the clear goal to move the company forward in executing HP’s strategy for profitable growth. We have strong market momentum and our ability to execute is irrefutable as demonstrated by our Q3 preliminary results.”

Lesjak has taken herself out of consideration as the permanent CEO but will serve as interim CEO until the selection process is complete. Candidates from both inside and outside the company will be considered. The selection of a new chairman will occur in conjunction with the CEO decision.

The company does not expect to make any additional structural changes or executive leadership changes in the near future.

HP CFO Doesn't See Win 7 Triggering PC Refresh Cycle

Eric Savitz — Wed, 19 Aug 2009 08:00:37 +0000

Hewlett-Packard (HPQ) CFO Cathie Lesjak says the company does not expect the debut of Microsoft (MSFT) Windows 7 to trigger a major PC refresh cycle.

“We think it looks like a good product, one that folks will really like, but we don’t think it is different enough to drive a refresh cycle,” she said in an interview this afternoon with Tech Trader Daily following the company’s Q3 earnings report. “It’s kind of the way we though about Vista. Over time, folks will move. Others are calling for more of a hockey-stick effect, but we’re not counting on it at this point.”

Meanwhile, Lesjak says the company believes business conditions overall are stabilizing. She said U.S. and China demand stabilized last quarter, and that the trend spread into the Asia Pacific region in the July quarter.

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HP CFO “Very Confident” on Current Quarter Guidance

Eric Savitz — Tue, 16 Sep 2008 21:36:08 +0000

Hewlett-Packard (HPQ) CFO Cathie Lesjak today told investors at the Bank of America securities conference in San Francisco that the company remains “very confident” it can reach its current guidance for the fiscal fourth quarter ending November. HP sees profits for the quarter of 95-97 cents a share and revenue of $30.2 billion and $30.3 billion, Reuters notes.

Lesjak also said the company is confident it can meet its operating margin targets of 5-5.5 percent for fiscal 2009.

She said the impact on the company from the recently strengthened dollar to be “marginal at best.” She also said said that while HP will continue to buy back shares, it will do so at a slower rate in the next 12 to 15 months.

Yesterday, HP announced plans to cut 24,600 jobs following the completion of its acquisition of EDS.

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HP Declares EDS Employee Surplus

John Paczkowski — Tue, 16 Sep 2008 20:27:45 +0000

[ See post to watch video ]

New From HP: PinkSlipJet EDS Edition

John Paczkowski — Mon, 15 Sep 2008 22:20:14 +0000

Cost-cutting is one of my favorite subjects. We have quite a bit more to do.”

– HP CFO Cathie Lesjak, Sept. 10, 2008

When Hewlett-Packard (HPQ) CFO Cathie Lesjak said she was fond of cost-cutting, she wasn’t kidding. On Monday HP announced plans to cut 24,600 jobs over the next three years as it digests Electronic Data Systems, the technology services giant it acquired for nearly $14 billion this summer. The job cuts amount to about 7.5 percent of the combined company’s total workforce, and most will come from EDS, whose bloated cost structure was in need of a good trim. HP estimates $1.8 billion in annual cost savings once the three-year program is completed. “I think most of you that follow us know I am a big believer that having the most efficient cost structure directly relates to your ability to scale and grow,” HP CEO Mark Hurd explained to securities analysts.

Incidentally, 24,600 sacked employees is a new record for Mark Hurd, whose first big act as HP’s CEO was a restructuring that eliminated some 15,000 jobs.

[Image credit: jischinger]