HP to Simplify Its Way Out of Current Slump
HP chief executive Meg Whitman said that the company's lower revenue and profits had been negatively affected by supply problems with hard drives, but she positioned the company's overarching problems as structural.
HP chief executive Meg Whitman said that the company's lower revenue and profits had been negatively affected by supply problems with hard drives, but she positioned the company's overarching problems as structural.
Whitman said that the solution to the company's problems wasn't better engineering or more attractive products, but reducing complexity in its processes, eliminating cost, and freeing up capital for future investments. Whitman did not mention any forthcoming layoffs.
net earnings of $1.5 billion, down 44 percent from a year ago, on revenue of $30 billion, a decrease of 7 percent. HP earned 73 cents per share. Wall Street expected revenue of $30.7 billion.
Whitman said that she was aware of the problems, which boiled down to halting the decline in revenue. To jumpstart revenue, HP now has to win market share in every single market it can, she said.
"We know what the problem is, we have a plan, and now we have to deliver on it," Whitman said. "But I'll be honest with you - this is a multi-year journey."
Like , HP said that its results were affected by shortages of hard drives due to last year's floods in Thailand; more than half of the company's revenue shortfall was due to the shortages. That negatively affected HP's Personal Systems Group and its Enterprise Servers, Storage and Networking, executives said.
As a result, HP prioritized profitable customers, profitable products, and profitable segments, Whitman said - apparently the opposite of the strategy Dell employed, which felt that it had to use the drives to push through shipments of low-end systems. She said that she was not worried by any losses in market share as a result of those decisions.
Whitman, who now has led HP for six months, said that her perspective on the company's status had "evolved," and her to-do list included three items.
"In my mind, I would put the issues into three buckets," Whitman said. "First, is fixing our execution, ensuring that we have the right systems and processes, and people. This includes optimizing our supply chain, SKU reduction, to remove unnecessary complexity from the way we design, deliver, and manufacture product. Upgrading our sales tools and systems to respond more quickly to customers, and increasing the productivity of our sales force by rationalizing our go-to-market."
"The second bucket is about addressing ongoing issues in each of our businesses, from IPG, to PSG, to ESS to Services," Whitman added. "We didn't make the investments we should have during the last few years to stay ahead of customer expectations and market trends. As a result, we see eroding revenue and profits today. We need to invest now, as a market leader, from a position of strength. That's especially true, because these businesses are not just under intense competitive pressure, but are also pressure by tectonic shifts that are taking place at the very foundation of our industry."
From there, Whitman's third bucket was that HP now had to lead in three areas: cloud, security, and information management.
"We see a once-in-a-generation chance to define the future of technology, and position HP as a leader for decades to come," Whitman said. "To seize this moment, we have to stabilize financial performance."
To do so, Whitman said that HP needs to "standardize, optimize, and automate" the company's internal processes.
"On the current trajectory, we just won't have the capacity we need to invest," Whitman said. "For years, we've been basically running our business in silos, and under that model we built some of the leading franchises in technology. But it's also made us too complex and too slow. Yes, some of the obvious costs were dealt with in recent years, but there's still much more we can do to streamline operations."