New HP CEO Whitman Pledges Commitment To Hardware Business8:57 PM EST Thu. Sep. 22, 2011
New Hewlett-Packard President and CEO Meg Whitman Thursday moved quickly to restore solution provider confidence in the world's largest IT company by pledging her commitment to the company's legacy hardware business.
"I want to reiterate our commitment to the hardware business," said Whitman in a conference call with analysts after being named the eighth CEO in the 72 year history of Palo Alto, Calif.-based HP. "The vast majority of the revenue of the company is still in the hardware business."
Whitman, the former president and CEO of eBay who joined the HP board eight months ago, also promised to move as quickly as possible to eliminate the uncertainty that has stalled hardware sales in the pipeline for some HP solution providers since the company announced on August 18 that it was considering spinning off its $40 billion Personal Systems Group (PSG) PC business.
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Whitman's commitment to the hardware business couldn't come quick enough given HP CFO Cathie Lesjak's warning on the conference call that the company could miss revenue targets for the current quarter because of uncertainty in the outlook for the hardware business.
Whitman's hardware comments represent a direct strike against her predecessor, Leo Apotheker, who was ousted by HP's board Thursday.
Apotheker, a former CEO of software giant SAP, was sharply focused on remaking the hardware behemoth into a software power even though software sales currently only account for about two percent of HP's annual sales. HP solution provider partners that built big businesses selling HP PCs, servers, networking gear and data center solutions viewed Apotheker as a hardware antagonist.
Besides looking at spinning off the PC business, Apotheker's boldest move as CEO was the company's planned $10.3 billion acquisition of enterprise software maker Autonomy, a deal which has been widely criticized because of the high price tag that HP is paying for the company.
When asked if she would review HP's recent strategic decisions, Whitman endorsed the moves made by Apotheker, herself and the rest of the board, including the Autonomy deal and the potential PC spinoff.
"From what I know now, I think the strategy is right and the initiatives we undertook on August 18 are right," she said. That said, Whitman will review the "strategic initiatives" that have been put in place at HP and "surface with my point of view on this." What's more, she acknowledged that HP has "got to leverage the entire portfolio to bring solutions to market that solve customer problems."
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John Convery, executive vice president of vendor relations for Denali Advanced Integration, one of HP's top national enterprise partners headquartered in Redmond, Wash., applauded Whitman's no holds barred recommitment to HP's hardware business.
"I am very pleased to hear that the new CEO says she is committed to hardware," said Convery, whose company shipped more than 25,000 HP PCs in the last year. "I think the issue they had is the previous CEO lost sight of the real HP value proposition. We do IT consulting. It is a services-led model, but the hardware component is critical to provide the end-to-end solution. The value of HP has always been the full product portfolio from the desktop client to the data center. Hardware is a critical piece to the total success of HP.
"HP has to get back to basics," said Convery. "It is all about execution. You have got to remember what got you to the dance, what gave you a competitive advantage. It is critical moving forward that the HP leadership understand that the tremendous value of HP lies in the breadth of their product offerings. They are the only company in the IT business that has that full product portfolio. Even with a Personal Systems Group spinoff, it doesn't change the ability for each part of HP to leverage the strength of the total product portfolio."
Ray Lane, who moved from non-executive chairman to executive chairman of the board with Whitman's appointment as CEO, also on the conference call reasserted HP's commitment to the hardware business even as he endorsed the Autonomy acquisition and the PC spinoff as sound strategic moves.
Lane stressed that HP's acquisition of Autonomy, a move aimed at making HP a leader in what he called unstructured information management, does not mean that the board is intent on "transforming HP."
"That word has been stricken from our language," said Lane. "It does not mean we are transforming HP. HP is a $120 billion [company]. With Autonomy's enormous success and enormous profitability and synergies we can gain, we think we can build a helluva business out of it. But it has nothing to do with transforming. Hopefully we will see a bigger software portfolio, and we'll see more value-added services at HP. But we have $120 billion in hardware business that we care dearly about."
Whitman, for her part, said she is laser-focused on making sure HP meets its commitment to investors. "I know that HP has disappointed investors in recent quarters and we are not happy about it," she said. "Going forward HP will have no higher priority than to do everything in our power to meet the challenges of today's macroeconomic environment and frankly improve our operational and financial performance. At the same time,we have to deliver the world-class products, solutions and services our customers have come to expect from HP. We understand that our performance is under intense scrutiny and we will take the necessary actions to get HP back on track. That isn't something we can do overnight. It is going to take time. It is going to take a lot of hard work to bring all of the elements together."