HP CEO Whitman: We Still Have A Lot Of Work To Do

Hewlett-Packard CEO Meg Whitman Tuesday told Wall Street analysts that the computer giant has made "great progress" in its turnaround, having gained share in the most recent quarter in blade servers, PCs and printers. But, there's still a lot of work to do to "drive consistent execution," she said.

"Overall I am very pleased with the progress we have made, but we still have a lot of work to do to drive consistent execution and navigate a rapidly shifting marketplace," said Whitman after the company posted better-than-expected fourth fiscal quarter results that drove HP shares up 6 percent or $1.51 per share to $26.50 in after-hours trading.

Whitman said HP, which is entering the third year of her five-year turnaround plan, must improve its ability to execute and make sure that it keeps "the customer at the center of what we do."

[Related: HP Shares Rise After Better-Than-Expected Q ]

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Even with its first enterprise group sales growth in two years, she said the company is squarely focused on fixing its enterprise business go-to-market strategy around "channel engagement and pricing."

HP is, in fact, in the midst of an aggressive effort to significantly reduce the time it takes for solution providers to receive competitive bid pricing approvals. In addition, the company is aiming to bring to market new HP enterprise group exclusive channel bundles aimed at sparking sales growth.

With a significant hyperscale server deal win in the quarter, HP grew worldwide server shipments by more than 5 percent in the third quarter, halting a slump of eight consecutive quarters of shipment declines, according to preliminary market data from Gartner.

At the same time, rival Dell's worldwide server shipments, according to preliminary Gartner estimates, plummeted by more than 14 percent in the third quarter as the company closed a $24.9 billion leveraged buyout spearheaded by Dell Founder, Chairman and CEO Michael Dell.

Whitman said HP expects to gain over a point of share in its blade server business, extending its 27-quarter market lead in the business. "We saw improved sales in our mainstream server business, but we need to improve our pricing discipline and profitability," she said.

Whitman's comments came after the company posted results for its fourth fiscal quarter, ended Oct. 31, just above the Wall Street consensus of $1.00 per share on sales of $27.9 billion.

HP reported non-GAAP diluted earnings per share for its fourth fiscal quarter of $1.01, down 13 percent from the year-ago quarter of $1.16 per share. Sales for the fourth fiscal quarter were $29.1 billion, down 3 percent compared with $29.95 billion in the year-ago quarter.

For the full fiscal year 2013, HP reported non-GAAP diluted earnings per share of $3.56, down 12 percent from $4.05 in fiscal year 2012. Sales for the full fiscal year were $112.3 billion, down 7 percent from $120.3 billion in fiscal 2012.

NEXT: HP CEO Whitman On Improved Enterprise Group Sales Execution

HP's Enterprise Group's overall sales in the fourth fiscal quarter were up 2 percent to $7.59 billion compared with $7.45 billion in the year-ago quarter, and up 12 percent compared to the preceding quarter.

"We saw improved sales execution, a strong hyper-scale quarter, and stabilization in blades complimented by revenue growth in networking and storage," HP's Whitman said. That said, she noted that the enterprise business faced margin pressure as a result of an intense competitive-pricing environment and unfavorable product mix.

HP's strong Enterprise Group quarter with industry-standard server sales up 10 percent came just three months after Whitman shook up her management team, putting HP COO Bill Veghte in charge of the enterprise group business.

Whitman, in fact, praised Veghte and his team for "hitting the ground running." She called the early signs of progress in the group "encouraging."

HP's Printing and Personal Systems Group, under the leadership of Dion Weisler, who took the helm of the business in June, also showed share gains.

In fact, HP outperformed the market in personal systems with robust sales in the commercial PC business in a market that declined 9.5 percent in units in the quarter, said Whitman. That amounts to HP gains of 1.8 points of share compared with the year-ago quarter and a 1.2 point-share gain sequentially.

"We improved our share position in all three regions [in the PC business]," said Whitman. "In the fourth fiscal quarter, HP saw its first unit growth since the first calendar quarter of 2012 even as the market saw a continued decline in units." HP's commercial PC business was up 4 percent in the quarter with strong sales of the company's notebook line.

"The personal systems team did a good job managing the DRAM [cost] challenges during the quarter, but we expect upward cost pressure will create a headwind in the first quarter of fiscal 2014," she said. "We continue to manage the end-to-end cost structure of our Personal Systems business with profitability very much in mind."

Whitman said HP's printer business also delivered an "excellent quarter," outperforming the market for the second successive quarter and gaining four points of total unit market share compared to the year-ago quarter. The company's printer unit placements were up 6 percent in the quarter compared with the year-ago quarter driven by strength in laser printer volume and the small-to-medium-sized business market.

"Looking forward we will stay committed to smart capital allocation and profitable growth," said Whitman. "As we said at our security analyst meeting last month, we believe we can grow both margin and share over the longer term. We'll continue to be aggressive in targeted cases, but we have more opportunity to improve our profitability."