A year into her tenure as Hewlett-Packard's (HPQ) CEO, Meg
Whitman will make a pitch to Wall Street on Wednesday that is widely expected
to be a defining moment for the technology giant -- and for her.
Whitman's performance could determine how long she lasts at the troubled
firm, some experts say.
The renowned corporation is beset by an array of problems that have eaten
into profit, sent its stock price plummeting and raised serious questions
about whether it can pull out of its tailspin. Analysts will be listening
Wednesday for signs that the detailed strategy Whitman will outline can
deliver the punch the company needs.
"It seems as if HP is this big tanker out in the ocean, foundering," said
technology analyst Jack Gold. "I don't think anybody really understands their
vision. A lot of big companies have been down this path. They get so big that
people don't understand where they are going anymore."
Some even say the former eBay (EBAY) CEO and gubernatorial candidate
could be headed for a fall if she merely repeats her past prediction that
turning around HP will take at least four years.
"If she says that, in four to six months she'll be fired," said Trip
Chowdhry, a tech analyst with Global Equities Research. "This is not running
for office for another four years. I don't think investors have the patience
to hope and pray and wait."
Not everyone regards Whitman's position as so precarious, and her efforts
at HP so far have won praise. But many experts believe she must clearly
demonstrate at the San Francisco gathering how the company can be put on the
right course, because they contend it has badly lost its way.
Its top leadership has been in flux, with Whitman its fourth CEO since
2005. Moreover, sales have flattened in the past couple of years and profit
has dipped. In August, HP reported its biggest quarterly loss ever -- $8.9
billion, much of it due to a write-down of its 2008 acquisition of tech
services provider EDS.
With HP's debt totaling $30.6 billion, Whitman has attempted to rein in
expenses by jettisoning 29,000 employees over the next two years -- the
company's biggest workforce reduction ever.
Meanwhile, its stock price plunged to a 10-year-low last week, closing at
$16.71. Its shares have inched up since then, closing Tuesday at $17.13. But
analysts at Brean Murray Carret & Co. warned that HP's earnings could decline
further without more workforce cuts and "we could envision the stock as low as
$15."
Despite the emphasis placed on Wednesday's event, little has been
disclosed about what Whitman plans to say. But Whitman, who already has
reshuffled HP's management ranks and made other changes, realizes Wall Street
expects a lot from her. As she told The New York Times last week, "We need to
explain business unit by business unit what our strategy is, where the growth
is going to come from, what the products or services or solutions are that
we're going to bet on and how we're going to drive those consistently over the
next four to five years."
That could get complicated. HP offers what some experts regard as a
confusing jumble of products ranging from networking switches, routers and
data storage devices, to calculators, software and printers. And its PC
business faces increasing pressure from smartphones and tablets, markets it
has had trouble entering.
Although it briefly offered smartphones and a tablet based on the webOS
platform developed by Sunnyvale-based Palm, which HP bought in 2010 for $1.2
billion, the devices sold poorly and their production was quickly halted.
Nonetheless, Whitman last month told the Fox Business Channel that HP is again
developing a smartphone and on Monday the company introduced a tablet dubbed
ElitePad 900, aimed at business and government customers.
J.P. Morgan analysts aren't impressed. In a recent note to their clients,
they concluded that "HP has missed the tablet and smartphone revolutions," and
is now "too far behind to catch up with Apple (AAPL)." Warning that the
company's future "is fraught with risks," they said HP should sell off its PC
and printer division.
"A lot of things at HP are probably going to get worse before they get
better," said tech analyst Rob Enderle, adding that Whitman may resist making
big changes for fear of hurting the company's bottom line even more.
Even so, she needs to show the investment community some progress soon,
said tech specialist Patrick Moorhead.
"HP needs to demonstrate some quick wins, I mean over the next year," he
said. "It doesn't matter where. There needs to be some evidence that the
long-term strategy is paying dividends today. That's the way Wall Street
works."
Distributed by MCT Information Services
