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HP stock rises on CEO Meg Whitman's optimistic outlook

October 09, 2013|By Chris O'Brien
  • Meg Whitman told analysts on Wednesday that HP revenue is stabilizing.
Meg Whitman told analysts on Wednesday that HP revenue is stabilizing. (Shanghai Daily / Imaginechina )

Hewlett-Packard's stock rose more than 5% on Wednesday after Chief Executive Meg Whitman told analysts that the company's revenue was finally stabilizing after several years of decline. 

Whitman made her remarks at the company's annual analyst day. Last year, Whitman laid out a five-year turnaround plan for the company, but in recent months, analysts and investors had begun to have doubts that her efforts were gaining any traction. 

"This time last year I was feeling HP was falling dangerously behind," Whitman said. "Our business units lacked a clear, crisp, integrated strategy. Our innovation pipeline was there but wasn't being commercialized."

But now, Whitman says: "I am comfortable with the progress we are making."

That progress includes cutting 22,700 jobs at HP since she took over in an effort to reduce costs at a time when revenue was tumbling. The company's goal remains to hit 29,000 job cuts. 

While costs are within HP's power to control, turning revenue around has proved to be more complex.

The company has continued to see declines in nearly every aspect of its business, from enterprise and printing to personal computers, which have been particularly hard hit.

Last year, Whitman projected that the company would stabilize revenue within the current fiscal year, which runs through the end of October for HP. Whitman said the company would return to growth in fiscal year 2014. 

On Wednesday, Whitman adjusted that timeline, saying the company should stabilize revenue in fiscal year 2014.

"We expect total revenue to stabilize and start driving new pockets of growth," Whitman said.

Still, given the anxiety around the company's fortunes, those lowered expectations proved to be a relief to shareholders. 

On Wednesday in mid-day trading, HP's stock was up $1.17, or 5.64%, to $21.92. That was roughly where the stock was trading two years ago when Whitman assumed control.

Patrick Moorhead, principal analyst at Moor Insights & Strategy, said that despite the somewhat slower turnaround, it was heartening to hear Whitman say that some of HP's businesses would start growing in fiscal year 2014. 

Still, he noted that HP faces a very competitive landscape, and a large, fundamental shift as customers continue to move away from buying their own equipment, such as servers, and move toward more cloud-based businesses.

"HP has moved beyond their 'stabilize and fix it' mode to growth mode," Moorhead said. "This pleased investors. HP still has challenges ahead which they acknowledge. Primarily, HP needs to execute on their cloud strategy and become a cloud player to take on Amazon, defend their infrastructure business from Dell, and find the solution to mitigate declining share and profitability in their consumer products."

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