Whitman to shareholders: 'HP matters'

Whitman to shareholders: 'HP matters'

Summary: HP CEO Meg Whitman told shareholders that the company still has many of the things that made it a winner. It's just got to lose the flab and get back in the game.

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Don't listen to them, baby. You still got it.

Pick yourself up. Shake it off.

It's a new day. The sun is shining.

You're better than this. Just look at you!

Like a best friend after an extended breakup, newly installed Hewlett-Packard chief executive Meg Whitman took to the stage at yesterday's annual meeting of stockholders to convince those with a stake in the company that HP's still a winner -- and don't you listen to a word anyone says.

"HP matters," Whitman said. "Without HP, the United States Navy can't deploy ships. British pensioners don't get their checks on time. Healthcare doesn't get delivered. [The space station doesn't function.]

"If HP doesn't work, the world doesn't work."

Riding on the coattails of an announcement that merged its longstanding PC and printer units, Whitman sought to strike a balance between comforting confidant and neutral third-party observer, reassuring shareholders and employees that HP still has a lot going for it, but there's plenty to be addressed, too.

So maybe you let yourself go a little bit, sweetheart. Don't worry about it. You'll be back on top in no time.

"It took us awhile to get where we are," she said, speaking of the company's declining financial picture, "and it's going to take us awhile to get out."

See also: HP's reorg: Enterprise carries the teamHP combines printer, PC unitsHP planning more 'business-oriented' cloud servicesHP's Q1 sales, outlook light; PC unit takes hit

WHAT IS HP?

During her speech, Whitman outlined HP's various businesses and assessed, from a bird's eye view, the strengths and weaknesses of each and their priority within the company -- foreshadowing acute changes in coming months.

For starters, she defined what HP as a company should be: "the world's largest provider of information technology infrastructure, software and services to individuals and corporations of all sizes."

The "core" of this company is its infrastructure business, Whitman said: PCs, servers, printers, networking. "Let's not run from that," she said. "Let's stand up and be proud of that."

HP's software business exists to "expand that core." It differentiates and adds value, but it's not there to "transform" the company into something it's not.

"Software makes the core sticky," she said, citing its Autonomy acquisition.

HP's services business, then, is also a value add -- "essential to making everything work for our customers," she said, by creating long-lasting customer relationships.

A revitalized HP, as envisioned by Whitman, must be the undisputed leader in converged infrastructure and application migration. "We want to lead in cloud, information optimization, and security," she said.

DON'T LISTEN TO THE CRITICS

But the turmoil of the last two years has sapped the morale from an "icon of Silicon Valley," and HP employees and shareholders first need to recognize that the company still dominates several areas of the technology industry.

"We've got market leadership in virtually every category in which we compete," she said. "We need to build on those strengths to capture the future."

In an industry in motion -- "tectonic plate shifts," she called it, likening today's shifts to the client-server movement of the 1990s -- HP needs to help its customers manage the complexity. It's positioned to win because of open systems and architecture, its leading role in private clouds and its long history -- that perhaps needs only to be removed from the closet and dusted off -- of innovation.

"We have embarked on rebuilding HP in a very thoughtful way that is very true to the spirit of innovation...at this company," she said. "We have a clear vision of where we want to go and what needs to be done...restoring HP's rightful place in the technology industry."

Among her many detailed points:

  • HP needs to restore credibility with investors by actually meeting its guidance.
  • Internal challenges remain. "Every business unit had some issues," she acknowledged.
  • There's pressure on all fronts for the Imaging and Printing group, once the "lifeblood of HP."
  • Enterprise servers, storage and networking remain solid.
  • Some factors were out of the company's control. The hard disk shortage caused by flooding in Thailand was a setback. The weak macro economy is a challenge. The shifting value of the Japanese yen had "significant negative impact on our printer business."
  • In the services business, there are challenges with resource allocation and its business mix -- there's a need to drop low-margin businesses and focus on higher-margin ones. "Turning services around is going to be a long-term journey," she said. "We need to have a services business at HP, but it is going to take awhile to [turn it around]."
  • "Overall, we've got to make it easier to buy from HP, sell to our customers and easier to get things done within HP."
  • "Because we are so big, it's harder to get things done" and respond to market changes, she said.
  • Successes: never losing sight of customer, delivering great product. "The history of this company is all about great product, and I believe if you don't have the right product for the right customer at the right time, [you won't be successful]."
  • Project Moonshot will "revolutionize server industry" and "restore our momentum."

TURNING THE SHIP AROUND

Whitman offered a plan for how she believes HP can shake off the criticism, drop the bloat and get back to business again.

"We need to invest in our businesses to provide meaningful innovation," she said.

However: "Our cost-structure is not sustainable." Operating expenses are growing faster than revenues -- and that's no way to run a budget. "This is not a sustainable formula," she said.

"We need to create the capacity to invest from cost-savings" by tacking the "tough stuff," such as business process engineering -- streamlining operations, removing processes and complexities -- that changes "how we do work."

"In the end, we cannot cut our way to greatness," she said. "We've got to move that [revenue line]."

SHAPING UP

The Printer-PC unit merger is the first example of this. Whitman said several times over the course of her speech that she sought to reduce the countless SKUs and products the company offers in an effort to achieve focus.

"We'll simplify our go-to-market and make sure we can make decisions on a rapid-fire basis," she said of the new business unit. There's a need to make it easier for employees to get things done and reduce costs, too.

Such as in marketing: HP spends almost $4 billion today. "I believe we can spend less" and get more, she said.

Such as in planning: "Investment decisions are going to have to be supported by business plans and risk [adjustments]," she said. HP needs to be more careful about investments.

However, investments still must be made -- in its people, processes and systems, improving execution; and in its supply chain, so that HP isn't just a premier components buyer but designs its products better from the beginning to take advantage of that environment.

"We have tremendous numbers of products," she said. "We have to do a better job of segmentation, matching products to customers, and [thinning product offerings]. We create tremendous complexity in the system by not thinking through [simplification]." And quality must be higher, she added.

The same goes for R&D spending.

"We've got to place some bets on disruptive innovation," Whitman said, to "fundamentally reset the industry standard." But a careful mix of evolutionary and revolutionary innovation needs to be achieved, balancing acquisition and organic innovation.

"I am a big believer in focus," she said. "Can we please do in R&D a few small things really well instead of a little bit [of everything?]"

MOVING FORWARD

To prepare for the company's 70th birthday in 2014, HP needs to reaffirm its course and dominate along the way. Where there are eroding profits, a crisp strategy must be in place. Where there are too many products, a slimming effort must take place.

Leaner, meaner.

It's time to eat right and go to the gym and get back on track, baby. You're a few weeks from being back to your old self again. You just have to believe it.

"If we don't have the very best products, uniquely suited to the markets that we serve, then we won't win," Whitman said. "We need to be a product company."

Topics: Emerging Tech, CXO, Hardware, Hewlett-Packard, Printers

Andrew Nusca

About Andrew Nusca

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. During his tenure, he was the editor of SmartPlanet, ZDNet's sister site about innovation.

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23 comments
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  • HP is delusional

    HP needs to put a marker on the rim of the bowl they are circling, so they can calculate the RPM and extrapolate the time it will take to clear the trap.
    thetwonkey
  • Time to focus...again

    Hopefully Meg Whitman will be able to follow through on her promises of a tighter focus on the 'core' business of HP, whatever that may be. The last 10 or so years have seen the company stagger from one objective to the next without any clear long term strategy.

    From the Compaq acquisition through to the whole WebOS debacle HP has been fond of trying to jumping on the latest bandwagon, only to promptly fall off the back.

    There appears to have been a philosophy within the business of 'smoke and mirrors', lots of noise and flash but no real progress.

    The merger of the PC and Printer business is probably the right move with a possible longer term objective of selling the whole thing off as a separate business a-la the IBM/Lenovo sale.

    HP does need to focus on the 'core' business, but before that it really needs to identify what that business is. I have no doubt that there is a great deal of 'hurrumphing' going on by the business, but it needs to set some clear targets on where it is going, and saying 'we're a big company' and 'it take a lot to change direction' just doesn't cut it.

    Ms Whitman is certainly making all the right noises, but anyone who has followed HP over the last decade has heard it all before. This could well be HP's last hoorah, let's hope that victory for the business can be snatched from the jaws of defeat and self destruction.

    Only time will tell.
    lee_s_avery
    • Too many suits

      What HP needs is to clear out business people whose only notions are to imitate other companies. HP will never be a better Cisco than Cisco. They will not be a better IBM than IBM.
      tkejlboom
    • IBM knew it couldn't sell the PC and printers business together.

      That's why we have Lexmark printers and Lenovo computers.
      Champ_Kind
  • Oh My

    See these things that have positive outcomes: I tell you, we'll do them. See these things we're doing with negative outcomes: I tell you, we'll stop it, but not in such a way that the pluses are reduced. (Pause) I thank you for staying for the rest of the meeting and not running off to the bank. (Whisper from audience "Or our brokers.")

    One of my little rules: the actual probability that one matters decreases every time one says it.
    DannyO_0x98
  • 5 Steps to Profit

    Meg, the first step HP needs to do is make laptops that can withstand a bit of daily use and abuse. I've yet to see a year-old HP laptop that didn't have some battle scars from things like "fell off the couch eight inches onto a shag rug".

    The second step is to fix your printer drivers. a LOT. Either make every printer speak PostScript/PCL, or fix driver packages to, y'know, NOT install half a gig of crap that people will never use but are forced to install (or at the VERY least make the custom installer be an actual custom installer instead of giving a single option as to whether or not I want a registration shortcut on my desktop).

    Step 3 is to make the first power-up of a laptop a positive experience. No 1,001 nags about registering, no eBay shortcuts on the desktop, no 100,000 updates from 9 different programs, no useless "advisor" crap. Windows. Drivers. Office 2010 Starter. WinDVD/PowerDVD (and nagless, uninstallable versions thereof). Roxio Creator (again, a nagless, uninstallable version). iTunes. Flash Player. Adobe Reader. Microsoft Security Essentials, or a full year, nag-free subscription to whatever antivirus you're aligned with. There is no use for anything else.

    The final step is to fix your horridly broken customer service. Double the budget for it, and half the sales pitches. No one wants to hear "we can't fix it for free, but we'll take your money to fix it" when they're stressed over a midterm. That's what sends people elsewhere. Even if you get their money for this repair, you won't get their money for their next machine. I defected from a decade-long string of HP machines to Origin PC and couldn't be happier. Why? Because I've never waited on a hold I didn't request, I've never had to provide a serial number, I've never had to ask my support rep to repeat what they said, I've never felt they were reading off a cue card, and I've never been denied a part replacement. Why do I choose Canon printers? Because their ink is relatively reasonably priced, their bundled software is both high quality and 100% optional, their driver installation takes less than a minute, there isn't a single executable in my startup list that wasn't there before I installed the drivers, and their print quality is better than yours - and again, I paid twice as much for my MP970 and couldn't be happier to NOT have an HP product.

    All of that advice was 100% free. Here's to hoping it's valuable.

    Joey
    voyager529
    • Not bad advice...

      But it won't help them return to profitability because the consumer business is not a profit driver for them.
      SlithyTove
      • Correct...

        As much as Consumer business puts the brand into heads of "masses", HP makes no secret that their "bread & butter" comes from the Enterprise side of the business. And, HP understands that credibility in the minds of IT folks is much more important than in the minds of fickle consumers who will quickly run off to "better pastures" at the drop of a hat. There is not such thing as "brand loyalty" when it comes to consumers.
        Willnott
  • their printers are overpriced junk and pcs are too

    commoditized. Put in your own os and give a perception of it might help, but especially re: printer quality, HP had mooched off its name.
    HypnoToad72
  • HP Management & BoD Effectively Destroys a Great Company along with thousand Souls

    Are you happy now? How can you go home and sleep at night? HP CEO must clean up its Board and management as part of her priorities. Or they will figure out the way to blame and kick you out before the HP Titanic can turn itself around.
    My biggest problem is I have strong faith in HP and still do: retirement and investment are with HP. It hurts deeply.
    Netteligent
  • Translation...

    "It???s just got to lose the flab and get back in the game."

    translated, "We are going to lay off more Americans and off shore their jobs".
    NoAxToGrind
    • Pretty much

      Mark Hurd was a cost-cutting bean counter extraordinaire. That was pretty much his only gig.

      Not sure exactly what "flab" they think they have left after letting Hurd run around with the scalpel for a few years.
      SlithyTove
      • Flab?

        What Hurd did was to cut in areas where he thought there was "flab" without fully investigating them. He was too impatient to dig in and get real details. Of course we have to admit that Leo was even worse because of his self-inflated sense of worth, because he had no concept of doing anything except mouthing platitudes. That said, who can disagree that Meg took on a gigantic job to help recover the scattered pieces. More power to her. (disclaimer: I am not an HP employee, and do not own any HP stock... I have no personal vested interest in whether HP succeeds or dies.)
        Willnott
  • Sorry I ever bought a HP product

    I talked my Wife into buying a HP DM4 laptop. What a mistake that was. Sure it looks great on the outside but she has had nothing but issues with stability (fan runs full bore), crashing, strange power losses even when laptop is closed. I finally ended up uninstalling a lot of the HP ( value added) crapware and it seems to run a bit better.
    Don't even get me started on their printers. Talk about a cash cow selling ink for cheap thirsty printers. Meg has a long road ahead to reverse this trend and unless everyone in managment stops their lip service and actually makes changes. I do not see HP doing much better.
    jscott418-22447200638980614791982928182376
  • meg is in it for meg

    she knows nothing about technology or how to streamline the product line. this is an accident than can be predicted. the moment hp put all their ducks behind this fool they were doomed.
    droidfromsd
  • Meg Has it right!

    As usual, "analysts" and kibitzers only have their own self interest in mind (which you can see in spades by reading comments here) and can not see or appreciate the big picture. Those directly involved with the busines know better than anyone else exactly where they stand, and where there are opportunities for improvement. Meg has a record of developing growth with practical methods, and it makes no difference whether others may have personal wishes that differ somewhat - the overall picture will become better under her leadership.
    Willnott
  • HP cutting the Fat

    I agree, unfortunately, most of the "Flab" is the Board of Directors as well as Upper Management. At least they don't use 3rd world caps on motherboards like Dell. But HP computers too me, mean overpriced antique parts with crappy service agreements.
    trust2112@...
  • Flab?

    Again, the most important flab that H-P could lose could lose is Meg Whitman! This old gas bag has been bamboozling people here in The Valley for years. I know Bill Hewlett and David Packard are spinning in their graves listening to this BS...
    Woned B. Fooldagan
  • Blowing Hot air up my butt

    What the hell did she just say?!? She sounds like the guys running for the presidency. How to improve your products?!?
    1) stop flooding the market 100 different flavors of computers and printers that are unreliable and turn into big steaming piles of crap in 18 months (or sooner).
    A)improve the quality of the parts that go into the unit, cheap is NOT the way to go anymore. Here is old saying "garbage in, garbage out!"
    B) Stop putting so much extra software (games, extra utilities,3rd party software etc....) especially when comes to the restore partitions and giving the person the control in what to restore on the computer.
    2) The way your scanners work they suck. I especially hate the software, its confusing as hell.
    3) Installation for your All in one printer/scanner/fax unit is a long an arduous task. In most cases it can take up to 45 minutes to an hour to install the software if everything goes smoothly. The longest its taken 4.5 to 5 hours.
    Cut the fat, slimline the company whatever (hopefully with a bare minimum loss of jobs). When you are doing that at least to remember to improve the product along the way. It's embarrassing (and sad) to have to explain to my customers why HP is not the product to go with anymore. If you can't tell already I am in the computer repair service end of the industry.
    kschey
  • About those endless SKU's

    I own a small business that specializes in servicing, repairing and providing supplies for HP printers to business (no consumers) - and one of the biggest headaches I have encountered over the 22 years I have had this business is the repair parts incompatibility and redundancy. In some cases, the absolutely identical part in one printer model is given a totally new part number in another printer model. In other cases, the only difference between parts may be the color of the plastic used. This causes me to have to stock all kinds of duplicate parts unknowingly and makes me see red when I realize the part is the same as another one i have on the shelf. And then they are constantly changing the part numbers for existing part for no apparent reason. And don't even get me started on the wholesale cost of repair parts! Damn!
    paulettem