Meg Whitman: HP Is Seeing No Sales Disruption From Planned Split
Hewlett Packard CEO Meg Whitman Tuesday told Wall Street analysts that the $112 billion computer giant saw no disruption in the sales trenches after it announced a plan to split into two new publicly traded Fortune 50 companies.
"I am actually happy to report that I don't think we saw any disruption in the fourth quarter," said Whitman.
HP communicated directly with 38,000 customers and 69,000 partners in the first 18 hours after the October 6 announcement of the split, said Whitman. "Almost universally they are enthusiastic about this," she said. "They think it is going to be good for them and good for their business because we will have two more focused companies that have an ability to react faster to the marketplace."
/**/ brightcove.createExperiences(); /**/
Related Video: Whitman: Why I Split HP
The positive customer and partner reaction is also spreading through the ranks of HP's 275,000 employees who feel the new companies are going to be "more nimble" and more competitive in their respective markets, said Whitman. "I am really heartened by how we have approached this," she added. "This is HP at its best: an execution machine."
The upbeat assessment comes two months after HP announced plans to launch effective Nov. 1, 2015, a $57 billion enterprise computing business that will be known as Hewlett Packard Enterprise and a $57 billion personal systems and printing business that will be known as HP Inc. Those two new businesses will not be simple spin offs, said Whitman, but rather an opportunity to create two new ultra competitive companies from a "clean sheet" of paper. That will involve zero-based budgeting that could open the door to innovative cost savings and efficiencies.
HP Tuesday reported non-GAAP diluted earnings per share of $1.06 on sales of $28.41 billion for the fourth fiscal quarter ended Oct. 31. The Wall Street consensus was $1.06 per share on sales of $28.76 billion. The slightly lower than expected sales for the quarter sent HP shares down 36 cents or one percent in after-hours trading to $37.27.
HP put together sales expectations for the company's fourth quarter with regard to the impact that the split announcement would have and sales came in "a bit better even in an environment in which currency moved against us to the tune of several hundred million dollars," said HP CFO Cathie Lesjak. "We continue to feel very confident that we can execute in FY 15 while we are separating the company."
NEXT: HP Partner MCPc Sees Only Upside From HP Split
MCPc, the $262 million Cleveland-based HP Platinum partner, has only seen positive responses from customers as it has communicated the benefit of the HP split, said MCPc Chief Marketing Officer Jed Ayres.
"Customers have divergent teams working on these two different parts of the technology stack anyway," said Ayres. "When you look at the people buying PCs and people buying data center solutions there is very little overlap. The buyer is different so it is less disruptive than you think."
MCPc, ironically, decided to split along the same lines in the summer well before the HP split, creating a separate PC and enterprise data center business, said Ayres. "Everyone realizes this is a new world order where you have to make the bold moves to help customers solve the new style of IT," he said. "The new style of IT requires a new style of company and a new style of partnering. It is a whole new paradigm. What HP Is doing is creating a more agile focused organization that can help customers more effectively."
Ayres sees the MCPc split and the HP split setting the stage for MCPc to double its HP business over the next 24 months. "The HP split really affirms the move we already made and has added serious wind to our sales," he said.
HP will give an update on the costs of the split and provide more details on the progress made by the separation management team when it reports its next quarterly results.
Whitman, for her part, is confident that the separation was the right move as HP heads into year four of her five year turnaround plan. "The separation was totally the right thing to do for this company," she said. "It will make us more customer focused. It also gives us the chance to clean-sheet two new Fortune 50 companies."
Whitman said HP is using the split as an opportunity to look closely at the cost structure of the new companies. "What we are not doing is separating the company into two pieces exactly as it is today," she said. "We are using this opportunity to really think through, knowing what we know now, how these two new Fortune 50 companies should be organized. That has been really interesting and is going to be really good for both of these companies."