The numbers don't lie: the only major company that spends less of R&D than HP is Dell, and look where they ended up.
HP innovation is really left in the hands of Intel and Microsoft, the two technology drivers. In areas where neither of them are strong (like storage and security) HP has had to go out and purchase the technology at a very high premium. That's not too smart.
The new CEO might have a chance to fix the problem before it becomes a catastrophe, but it will take new blood, somebody with a lot of backbone who acts more like Steve Jobs instead of a glorified bureaucrat.
Hewlett Packard told financial analysts that the company is invested and positioned to “grow the core markets and attack the adjacencies” as it offered its outlook for the coming year.
The company said it expects revenue for fiscal 2011 revenue to be between $131.5 billion to $133,.5 billion, an increase of 5-7 percent over the previous year. Earnings per share will be between $5.05 and $5.15, or 12-14 percent increase over last year.
Wall Street had been expecting revenue of $131.4 billion and was expecting HP to deliver non-GAAP earnings of $4.99 per share.
Also: HP analyst meeting preview: Analytics, cloud, mobile questions abound
The outlook is especially critical because HP is still without a permanent CEO and the road ahead, be it financial or strategic, could hit a detour or two depending on who’s steering the ship in the coming months.
Critics have questioned the investment strategy, noting that HP - as a company whose name was once synonymous with “innovation” has been buying technology through acquisitions.
In her opening presentation to analysts today, CFO and interim CEO Cathie Lesjak reaffirmed the company’s commitment to research and development investments, saying that it will grow R&D faster than revenue in fiscal 2011. HP, she said, has a “balanced investment in organic R&D and targeted M&A.
“Innovation is, has and will continue to be core for HP,” she said.
However, she was unapologetic for the acquisitions, going to great lengths to highlight the checklist that any potential acquisition goes through, including questions about the ability to leverage the technology across multiple segments of the company as a means of growing markets and revenue and building upon the broader strategies.
Other highlights:
- The executives were asked if the solid forecast and strategic plan offered at the meeting was an indication that the next CEO would be someone from the inside. Lesjak was quick to say that analysts shouldn’t take anything away from the meeting about who the next CEO might be. The committee has told her, she said, that there are both good internal and external candidates.
- Lesjak stressed that the Palm acquisition is not included in the guidance for the Personal Systems Group. Instead, it remains incubated in the Corporate/Other segment. Palm is a long-term investment, she said. And while a WebOS tablet is on the way, it’s clear that there are bigger plans for the mobile operating system that go beyond tablets.
- Ann Livermore and Lesjak said - a couple of times, actually - that the investment in R&D is shifting to put more dollars into innovation for “new stuff,” as opposed to “maintaining stuff.” In 2008, only 35 percent of the R&D budget went toward products that would move technology forward in the future. Today, that segment gets 58 percent of the budget. Lesjak also stressed that the trend from maintenance to innovation dollars is happening across the company.
- The company spoke of the large target markets but said that “the other story here” is that the company isn’t covering other potential markets effectively. Specifically, the company is eyeing the enterprise and emerging markets as its targets for new growth. As such, it said it is growing its sales force, not only in size but also in quality.
- The growth in digital content is fueling the need for seamless connectivity between multiple devices - customers want their content on their terms, on their choice of device and are not going to accept an offering that ties data to a single device. “The amount of digital content is doubling every 18 months,’ Lesjak said. “We need to store, manage, access and print that content.”
Related: HP’s interim CEO: Board likes CEO candidates; We’ll make up with Oracle
