Meg Whitman, chief executive of Hewlett-Packard, said that “you can feel the turnaround taking place at HP” in the company’s earnings call today. She touted the fact that the company hit its earnings per share target, b...
Meg Whitman, chief executive of Hewlett-Packard, said that “you can feel the turnaround taking place at HP” in the company’s earnings call today. She touted the fact that the company hit its earnings per share target, but ignored that the company’s revenue fell short in her celebratory comments. But in a conference call with analysts, Whitman took a swipe at Dell, which is in the midst of a struggle to go private under founder Michael Dell. After hours, HP’s stock is up 13 percent on the stock market, at $24.09 a share. “You saw a competitor Dell completely crater earnings,” Whitman said in response to a question. “Maybe that is what you do when you are going private. We are setting up the company for the long term.” She implied that Dell did that on purpose, since Michael Dell is motivated to repurchase shares in the company as cheaply as possible, and deliberately lowering earnings is a good way to get the share prices to fall. Dell hasn’t responded to Whitman’s comment yet. Whitman is probably more than a little angry at Dell because it and other PC makers evidently competed aggressively on price at the low-end of the PC business, stealing market share away from HP, which saw its consumer PC unit sales fall 29 percent in the second fiscal quarter ended April 30. HP hit its earnings targets, but fell short on revenue, reporting earnings per share of 87 cents on revenue of $27.6 billion today. Whitman said she could see the turnaround taking place based on conversations with employees, customers and partners. But she reiterated that the turnaround is a multi-year journey. While it isn’t as cool as Apple and it doesn’t make games like Microsoft, HP is a critical piece of the electronics industry, as it straddles both the consumer and enterprise markets across a bunch of product lines. The company has $120 billion in annual revenue (the biggest in the industry by that measure) and more than 330,000 employees. It has made 70 acquisitions in the past 15 years, but its stock price has been hurting lately. “I must say I am encouraged with where we are,” Whitman said. She said HP is investing in innovation, bringing cost in line with revenue, improving profits, lowering its debt, optimizing cash flow, and exceeding financial performance. In the call, Whitman said the balancing act was tough when it comes to taking market share or growing profits. At the low end of the PC market, HP lost share and gave up some business rather than lose money on deals. She said the team is evaluating what it can offer at the low end. She said HP was getting better at electronic commerce, making its e-ordering portal more streamlined in the quarter, reducing cycle time for quotes up to 20 percent in Asia. Meanwhile, she said she was cautious about guidance for the second half of the year,noting “macroeconomic headwinds” as Europe and China slow down economically. In printers, Whitman said HP was doing well as it moves to high-end printer and ink sales. She said HP gained strength with products like a new OfficePro printer, high-value ink, and multi-function printers. She said HP will roll out a subscription-based service for ordering ink in the home. HP reduced its debt during the quarter. Personal systems (PC) revenue was down 20 percent from a year ago, with a 3.2 percent operating margin. Commercial PC revenue was down 14 percent and consumer revneue was down 29 percent. Total unit sales were down 21 percent, while desktops were down 18 percent and notebooks were down 24 percent. HP is poised like other PC makers to introduce new machines based on Intel’s latest microprocessors, code-named Haswell. Printing revenue was down 1 percent, but its operating margin is still strong at 15.8 percent. Hardware unit sales were down 11 percent from a year ago, with commercial units down 5 percent and consumer units down 13 percent. Enterprise revenue was also weak, down 10