7 Looming Tasks On HP CEO Meg Whitman's To-Do List

Meg Whitman Addresses The Shareholders

Hewlett Packard CEO Meg Whitman fielded a wide range of questions this week in HP's annual shareholders meeting. She was asked about the company’s stance on human rights and retirement benefits, whether HP should open retail stores, and why it is getting outpaced by Apple. One shareholder even asked Whitman why it takes so long for HP to ship replacement printer parts.

Yet all of these issues pale in importance to HP's difficult financial situation, and the cost cutting and other steps HP will have to take before it can boost R&D investment and, the company hopes, start making products that cause people to camp outside stores overnight to get first crack at buying them.

Following are 10 snippets from HP's annual shareholders meeting that shine light on the challenges HP is facing, as well as how Whitman -- and her executive team -- intend to address them.

Restore Confidence In The Board

HP's board of directors has been vilified for guiding the company into its current precarious position, and especially for its role in the drama surrounding ousted CEOs Mark Hurd and Leo Apotheker.

In the shareholder's meeting, Chairman Ray Lane sought to calm investors' concerns about the recent turmoil, noting that three-quarters of HP's current board leadership has served less than three years. Last November, in response to shareholder feedback, HP added activist shareholder Ralph Whitworth -- who supports increased R&D spending, share buybacks and higher dividends -- to its board, Lane noted in the meeting.

Whitman also told shareholders about an HP program called Board Buddies, in which each board member is assigned to a "buddy" in HP's executive management team. The idea is to deepen board members' understanding in key business areas, Whitman said.

Develop The Next CEO From Within

Is there an HP executive who is being more obviously groomed to succeed Whitman than Dave Donatelli, head of HP's Enterprise Servers, Storage and Networking (ESSN) division?

Whitman probably isn't leaving anytime soon, but when she told shareholders HP wants its next CEO to come from within the company, they erupted in applause. After a string of CEOs hired from outside -- and the mixed results that accompanied these hiring decisions -- shareholders are understandably wary about the company's succession plan.

Donatelli this week was named head of the new HP Enterprise Group, which will expand his duties from ESSN and HP Technology Services to include oversight of HP's global accounts sales organization. He has been rumored as a potential CEO candidate in the past, and his expanded role at HP will serve to fuel such speculation.

The PSG-IPG Marriage, Part II

As it did in 2005, HP this week combined its PC and printer businesses into a new business unit, called the Printing and Personal Systems Group, led by PSG chief Todd Bradley. And listening to Whitman, it is clear that this move was not just about cost cutting.

"This strategic realignment is a perfect example of our thinking," Whitman told shareholders. "By combining PSG and IPG, we're going to get a lot of go-to-market synergies. We're going to be a much more powerful force selling into retail, and our partners will be more powerful selling into the enterprise."

As part of the re-org, marketing functions across all HP business units will now be handled by Marty Homlish, chief marketing officer. "We spend almost $4 billion on marketing at HP. "I believe we can spend less and deliver more effectively," Whitman told shareholders.


Sharpen HP's Cloud Message

Cloud is a disruptive force that is putting well established profit sources into play, and HP will have to move quickly to capture this business, Whitman told shareholders. But this won't be easy, she said, as many vendors are building vertically integrated technology stacks in an effort to lock in customers.

The good news for HP is that its Converged Infrastructure strategy is tailor-made for cloud computing. "We already have a strong position" in the cloud, Whitman said, adding that HP has nearly 600 CloudSystem customers, including many service providers.

However, Whitman said HP will need to step up its game from a marketing standpoint to cement its leadership in the space. "Very few people understand what a leader we already are in private cloud," she told shareholders.

Focus More On Supply Chain

HP has long crowed about the efficiency of its supply chain. Yet in HP's first quarter earnings last month, Whitman said the hard drive shortage from the Thailand floods significantly affected results for PSG and ESSN.

Though this is an industry-wide issue, HP appeared to have absorbed more of an impact from the HDD shortage, raising questions about just how much of an asset its supply chain really is.

Whitman has made improving HP's supply chain one of her priorities, and one way she intends to do this is by designing products specifically to leverage it. "Our supply chain is good, but I think it can be better," Whitman told shareholders.

Reduce The Volume Of Product SKUs

As HP partners can attest, HP has an inordinate amount of different products, and this is especially true in PSG. Whitman wants to simplify matters by whittling down the number of product versions, or SKUs, that HP offers. Doing this will shave costs and make HP easier to do business with, she said.

"We have got to reduce complexity," Whitman told shareholders. "One reason it is so hard for employees to get things done at HP is the tremendous number of SKUs. Each product you launch needs its own logistics, and its own supply chain," which adds to the complexity.

Get HP's Innovation Engine Humming Again

HP spent $3.2 billion on R&D in fiscal 2011, a figure that represented 2.5 percent of annual revenue. But it is unclear at this point when the company will be in a position to substantially increase that figure. That's because cost cutting is Whitman's top priority right now.

Job cuts are coming, and "everything is on the table," she reportedly told HP employees earlier this week. "We're not at a point yet to even begin to think about the number of people" that will be laid off, Whitman told The Wall Street Journal.

Before increasing R&D, Whitman intends to first improve HP's bottom line and return cash to shareholders. "We need to invest in our business to drive meaningful innovation, but that's pretty tough right now," she said in the meeting.


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