HP braces for rough 2013, patience required

HP braces for rough 2013, patience required

Summary: HP cuts its fiscal 2013 outlook and CEO Meg Whitman said it will take time to mend from the company's miscues in recent years.


HP CEO Meg Whitman made her case for the company in an analyst powwow, but the underlying message is that the IT giant has been rattled by executive turnover and it'll take time to right mend its struggling units and balance sheet.

Meanwhile, HP's outlook for fiscal 2013 will fall short. HP CFO Cathie Lesjak said the company expects non-GAAP earnings of $3.40 a share to $3.60 a share with revenue declines of 11 percent to 13 percent.

Wall Street was looking for fiscal 2013 earnings of $4.18 a share. HP is seeing weakness across the board.


Whitman's message had a familiar refrain to it. In fact, Whitman's chat sounded like recent earnings conference calls. Among the key points:

  • HP is No. 1 or No. 2 in each of its major markets and has a trusted brand.
  • The company has diversified from printing as a cash cow.
  • But CEO turnover has killed HP's continuity. "The single biggest challenge at HP is the changes in CEOs," said Whitman. In other words, HP has had inconsistent plans.
  • EDS, now HP services, will take time to fix.
  • HP now has a more "compelling" CRM system in Salesforce.com.
  • Mobility, cloud and hyperscaling are market changes HP must navigate.
  • Add it up and Whitman said her first year is a rebuilding year, profits will decline in enterprise services and 2014 will show "real recovery." By 2015, HP will be humming.

The catch there is no "silver bullets." Indeed, HP's biggest issue may be that it is spread a bit thin.



Going forward, HP will focus on cloud, security and information in the enterprise. Technology services will be integrated into the enterprise unit in 2013.

Whitman also was optimistic about PCs and printers, but noted HP needs to close product gaps. Multifunction printers are an issue.

HP CFO Cathie Lesjak walked through the balance sheet and realities facing the company. Lesjak said bouncing back to a mid-single A credit rating was a priority and HP needs to cut its debt position.

Bottom line: HP is retooling amid "deteriorating market conditions" with spotty execution.


Analysts going into HP's powwow weren't expecting any fixes and they were basically on target.

Barclays analyst Ben Reitzes said in a research note:

We believe HP still has structural issues that simply need time to play out. We believe the most important items to address are 1) the trajectory of free cash flow and plans for debt reduction, 2) how HP can stabilize the PC and printing businesses, 3) plans to reposition ESSN to achieve faster growth and 4) initiatives to revitalize and stabilize Services margins.

HP execs addressed some of those concerns, but the key variables here are time and patience. HP needs time to mend. Investors will need patience. Customers may need some too.

Shares of HP took a hit in afternoon trading. 


Topics: Cloud, Data Centers, Hewlett-Packard

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  • HP should stick to printers

    They Should have designs in the works for consumer 3D Printers and if they don't then they are missing out on regaining a market lead in an industry. just dumb.
    • HP computers are pretty good

      Very reliable all things considered, I personally had one last nearly 8 years before needing a replacement.

      Now, for tablets and laptops, they are going to have to realize that they cannot overcharge like they currently are. I made one with the same stuff in it as an ASUS computer? It was 600 dollars more expensive than the ASUS computer.

      They are overcharging and therefore people are passing them over.
    • HP, for me-- is the very Best!!!

      HP has been my computers, both Desktop and Laptop for many years.
      Also have HP printers all the way around.
      Would not change in a "heartbeat".
      Yes, some stuggles along the way-- but I am with HP All-The-Way.
  • HP a great company

    Am I the only one who thinks HP makes excellent servers and workstations?! I've been an IT consumer since early 80s and have owned almost all brands and no other company has come close to quality AND support of HP in servers and workstations!
    • HP makes good servers

      Their consumer products suck @$$!

      Bad design,bad support and QA from employees that are as stable as Charlie Manson on meth.
    • Agreed

      Their servers are much better than Dell for sure however as an employer they are one of the worst. If they want to see a turn around they need to learn how to invest in employees(start with competetive compensation..thay are waaay low for the market i work in) rather than scuttle them everytime they see a storm on the horizon.

    Let's face it, most people already own a decent PC and don't need to buy another one. In the next couple years, when these PCs will need to be replaced, tablet computers will probably be able to do most things that PCs do today.

    When this does happen, the chance that consumers will choose an operating system and a CPU other than Wintel are quite high. The PC era as we know it will never be the same, let alone go back to the days of yore when Wintel was the primary (if not the only) viable choice.

    Just like buggy whip companies at the turn of the century, PC makers need to face some hard choices. They need to change their approach drastically or get out of the business altogether.

    Just because Microsoft and Intel don't want to change doesn't mean the world hasn't changed around them.
    • They Sell more than PCs...

      Most companies DON'T have "Decent" PCs. They have a fairly decent server, some PCs that did the job four years ago, and they are putting off the cost of replacing those PCs for as long as possible. In a setup like that, having a fixed price contract in place to cover the cost of maintaining older hardware can be a boon for the company, and a potential goldmine for HP - provided they have a big enough stockpile of old parts.

      Not everyone is going to tablets and cloud storage, either. Anyone involved with security will scream blue murder at the thought of their precious data being stored in an unknown server, possibly in a foreign country, where a group of unknowns can potentially steal it and start hacking away at the encryption. Standalone mainframes are the safest [along with aircon ducting too small for Tom Cruise to crawl through]. Again, an area where HP has the potential to shine.

      So where's the problem? Small business. These typically upgrade more often, BUT insist on more reliability between the upgrades. If they don't get it, they switch suppliers.
      Alan Campbell
    • in some sectors the PC is dying a fast death at least

      The post PC world is definitely upon us, although ironically by (basically) everything becoming a computer, such that you no longer need a square beige thing sitting on a desk that we are all familiar with as “a computer”.

      I currently don’t have a computer at home.
      I have a tablet, I have a smartphone, I have multiple boxes that plug into my entertainment unit for streaming and playing of media in my home, I’m sure if I look in a cupboard somewhere I also have a gaming console, but I don’t have “a computer” (desktop or laptop) at home.

      In my car I have this thing which talks to my phone and my mp3 player, and runs GPS software, which is capable reading optical discs and flash media (usb or card), has a touchscreen monitor, has bluetooth, it sounds like I am describing a computer, I know it even has a mainboard, ram, and a processor, but I don’t call it a computer, I call it my car stereo.

      So for the consumer I largely agree with you. Many consumers don’t want a computer, and to be honest they never did. The want online shopping, they want email, or more than email more modern equivalents like being able to message their friends on facebook, on that topic they want facebook, they want to be able to keep digital photo albums, they want all these things that computers use to bring us, but they don’t really want a computer. And if they can do all these things with their phone or there “smart-tv” or a tablet, then why have a computer, especially as they never really wanted one in the first place.

      A computer is a tool, and should be a tool, so unless you are a student, or a professional that requires one for your craft (or you want one for your hobby) then there is less need for computers. And in that way they are dying a fast death (although not that fast, as the majority of the population don’t follow tech trends like the zdnet community)

      But then most days, I get up in the morning and I head off to work, where I work in a small building in my street which is only 10 storeys tall, and would only have about 5000 “computers” in it, plus a few rooms I never see the insides of full of cables and flashing light and a good number of server computers. Then, as I walk out to get some lunch, I see all the legitimately big buildings in my street, there are many of them, and many times bigger than my little building, and they all have many many more “computers” (although probably black or aluminium, and no longer beige)

      In this environment the “computer” is not dying a quick death, if it is dying a slow death I can barely tell. In this area, companies that churn out large numbers of generic mid level boxes should do well for a while.
      • more ... in some sectors

        Personally I think laptops (notebooks, ultrabooks, call them what you like) to be the market that will notice this the most. Originally laptops were a premium product, with less than premium performance, so all rich people, executives and people who needed them bought them. At this time people with home computers had desktops (and the computer table industry was born), people didn’t really want to dedicate a big space at home to a computer and buy a new piece of furniture. So when laptops became cheap they were the obvious choice for home users, as they’re self contained, and you could put them away when you were done. Also they had batteries, so you could take them with you. But in all those ways smartphones are better again, or tablets if you need a bit more screen size… or smart-TV’s (when they get more popular) if you want more screen size and are willing to have it fixed in one spot.
  • HP alienated a lot of IT pros

    with poor customer service,throwaway products and software support ,that to put it mildly,sucked big time.
    1.Had an HP printer out of warranty that had a flaky W7 drivers,$29 bucks to talk to somebody.
    2.HP released an NDPS gateway for Novell that they knew was bad (I beta tested it),after I told them it was still broke.
    3.Vista drivers were an absolute joke for at least 6 months to a year after the release of that OS.64 bit drivers?Don't think so!
    4.Had an AIO printer that had a bad microswitch,nobody could repair it because HP wouldn't sell the part to a 3rd party.Dumpster time!
    5.Had DOA printer from HP that had a logic board problem fresh out of box.Error said bad front panel.Tech shipped plastic faceplate after promising to send new printer.
    New (refurb(printer sent,DOA!
    6.Had HP laser printers that had Jetdirects that would lose duplex settings if configured through front panel when they went to sleep.Known bug that was never fixed.

    HP products are a joke!
  • HP is the worst PC maker out there. Old news. Failure intended in design.

    Hp's quality is also responsible for it's decline. Hp puts failure in design. Like a candle wick.
    Their laptops and desktops are famous for motherboard failures. Its even in a lot of pre employment questionairs. Hp sure has gone a long way down the toilet.
    The PC is not going anywhere, any time soon. There may be a reduction in the amount of people buying them, but there are a lot of people who wont have anything less.
    • I have to completely disagree.

      I own a small VAR with about 30 clients. Over the last 15 years, I have installed approx 40 servers, and well over 300 business class desktops manufactured by HP. Each desktop is in service for a minimum of 5 years, and each server for 7 (Unless, of course, minor upgrades just can't help the product keep up with current software demands). In all those years, I have had 5 calls to HP for warranty work, and in each case, I received the required replacement within 24 hours (in one case, I open the ticket at 5pm and the product arrived before I did the next day (about 8am).

      Everyones opinions are based on personal experience, and in my experience, HP not only makes rock solid products, if they DO break down, they stand behind those products like no other company I've dealt with.

      • I should clarify ...

        ... by HP, I mean Compaq. After the merger, HP Business Class Desktops are essentially Compaqs ... I believe it would be fair to say HP design in Personal Class, Compaq design is Business Class.

      • Their personal line is what i was refering to.

        I have no experience wit their pro line. I run a small PC repair shop. I handle about 150 to 200 PC's a week. Most of the PC's that come in with mobo issues are HPs. This is the basis for my claims.

        When looking at the circuit board design it appears the intended design the board is to fail in a certain time frame. The compactor stack will always have one of the low quality electrolytic that fails next the same value solid cap. Also their amd on board graphics chip always fail on their laptops. This seems to be true with all their personal units since 2008 and on.

        I am glad your units are doing good for you. Maybe their enterprise is not as bad as their consumer grade. Low quality consumer grade exposure gives a bad overall impression from a person who has not dealt with their enterprise grade.
        • There really are two classes of HP Hardware

          There really are two classes of HP end point hardware (desktops and laptops):

          1. Consumer grade junk that is designed using poor quality components to preserve the razor thin profit margins caused by a race to the pricing bottom - competing with Acer, Lenovo, and other Chinese manufacturers. These devices are the ones typically found in Best Buy and other computer stores.
          2. Extremely well-built commercial class products that are designed and built like tanks to MilSpec standards that will last for years (7+ years is not unheard of). Laptops average $2000 or more in this category. Desktops start at $1000 and up. These units are very difficult to find in retail stores. Usually purchased by businesses through VARs, resellers, and direct through the HP web site. If you are an end user and you have the money, go to HP direct to buy these.

          Here is a listing of the model names of each type of device:

          Consumer brands (low price, low quality, avoid if you can):
          Envy, Pavilion, 2000, Touchsmart, Pavilion Home, Omni

          Commercial Class (higher price, great quality, buy if you can afford it):
          EliteBook, ProBook, Folio, Z Workstations

          You get what you pay for.
    • HP does produce outstanding equipment

      I am the IT manager at a small company with 100 employees. Everything is HP in this office. I won't have anything else, plus the president likes HP as well. I have never had a single issue with any of the HP products I have purchased and installed. I have laptops, desktops, thin clients, servers, and swtiches all from HP. Nothing is wrong with their products. Even if there was a problem, so be. If HP makes 10,000 desktop systems a year and I happen to get one that fails. So be it, probability says there are bound to be a few issues. If you don't like HP fine, nothing wrong with that, but I don't see how bashing HP, saying they are JUNK and don't make a good product is doing this conversation any justice.
  • It'll take time...

    "it'll take time to right mend its struggling units and balance sheet"

    Is it just me, or does this phrase have sort of an Obama ring to it ?
    • Difference being that, Obama has a blank check to do whatever he wants,

      and HP can't afford to spend money it doesn't have, and can't borrow money it has no prospects of paying back; not soon, anyway.

      HP can't spend its way out of trouble, and Obama thinks he can spend the U.S. out of recession, while the reality is that, he's putting the country into deeper economic troubles. HP can't do anything like that, and it has to answer to its investors, while Obama doesn't care about the people he should be answerable to.

      HP can go bankrupt, and it can even be a target for a merger or buy-out. The U.S., not so much. The country is stuck, while HP has options.
      • Blank check?

        Just where is this blank check? Congress had to approve spending. The same people that are harping about the stimlus, guess what? Bush passed through 2 stimulus packages in his first few years, and Paul Ryan supported both. The same people that didn't want to raise the DEBT ceiling, did so 8 times during Bush's terms. Even Cheney said that deficits DON"T matter. The deficites started to spiral under Bush's policies. Two (illigal) unfunded wars. He started the Bank bailouts (Too BIG to fail BS). Unfunded Medicare Part(D) (prescription drug plan: aka: Gift to Drug Companies) That even included it's own donut hole (not to be confused with pastries). Two huge (unpaid for) tax cuts mostly benefitting the rich. Reduction of Capital Gains Tax to 15% (only benefitting the rich). Multi billion dollar, Non-bid contracts to Haliburton (Cheney's Company from which he still receives checks from). Now, Romney wants to return to exactly the same Bush/Cheney policies that caused the mess we noew face. The Republicans blame everything on Obama, even though it was their boy (ssshh! Don't say Bush) that caused it all. That was their game plan all along. Here's a senario: A Sherrif is leaving office at the end of the month, but he critically shoots an innocent man before leaving. The newly elected Sherrif takes over the next month. Shortly thereafter, the shooting victim dies. Who's responsible for his death? The Sherrif that shot him, or the new Sherrif?