HP's Whitman Aims to Rebuild

HP's Whitman Aims to Rebuild
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HP's Whitman Aims to Rebuild
The CEO of Hewlett-Packard Co., Meg Whitman, told investors during her first earning conference call to lower their expectations. With only two months in office, Whitman leads a company whose forecast for first-quarter profit as well as full-year earnings outlook failed to reach the estimates set by analysts. The company is yet to overcome the high spending on technology which was initiated by the former CEO, Leo Apotheker (Ricadela, 2011). The company’s ailing businesses are related to personal computers and IT services and Whitman has recommended increased research spending and reducing the size of acquisitions. She added that the company has over the past decade neglected conservation of cash and spurring home grown innovation. According to an analyst with Ticonderoga Securities LLC, Brian White, Hewlett-Packard (HP) went through years of underinvestment in markets where PCs and IT was experiencing increased competition.
The company stock has plummeted 36% this year and it declined further by 2.3% to $26.96 after this report. Whitman said that the Asian market looks promising but the rate of growth in Europe is slow. The results of the company will determine the decisions taken by the Americas. 2012 will be tough as the economic outlook is pessimistic in two out of there major regions. For the quarter ending in January, profit will be 83¢ to 86¢ a share, but analysts predict an average estimate of $1.11 a share. In the fiscal year 2011, profits will be $4 a share excluding certain items. This misses the average forecasted profit $4.58. The company felt a pinch in their PC, printing and server division during the fourth quarter which ended Oct. 31. This was due to reduced spending among both businesses and customers (Businessweek.com. 2011). The former CEO was replaced after he changed forecasts thrice in less than 12 months and PC units almost spanned off. Deutsche Bank AG analyst, Chris Whitmore, says that the profit outlook by Whitman for this quarter and fiscal 2012 is more realistic considering the challenges faced by the company.
Reachable goal
Although analysts have a “neutral” rating for HP, Whiteman says that the company has a “sell” rating and estimates are at a position where they can hit instead of missing. She adds that her plans next year are to give-up on large acquisitions, repair the balance sheet and mend the situation at the company after ouster of former CEO (Ricadela, 2011). The profit in the fiscal 2011 slowed down due to the after-tax one-time costs of $3.3 billion, or $1.56 a share. A decision to halt production of devices sporting WebOs, which had resulted from $1.2 billion acquisition of Palm Inc last year, led to expenses of $1.64 billion. The move was prompted by the fact that the company was makin...