HP CEO Meg Whitman tells analysts the company's revenue will accelerate by 2015, discusses competitive relationship with Microsoft, Intel.
Hewlett Packard's revenue should be flat next year with growth in individual segments but will expand rapidly in 2015, CEO Meg Whitman said Wednesday at a meeting with financial analysts in San Jose, Calif.
The guidance was more upbeat than some observers had expected. In August, the company announced year-over-year drops of 14% in earnings and 8% in revenue. Whitman said at the time that growth in 2014 was unlikely.
Her more optimistic tone on Wednesday provoked a positive response on Wall Street; the company's stock bounced almost immediately, even as research firms IDC and Gartner were announcing that the PC market -- a crucial part of HP's business -- had fallen for the sixth consecutive quarter.
In a statement, HP attributed the progress partially to an $8 billion reduction in debt over the last year. But Whitman pointed to other strengths, including a better-organized leadership team, the breadth of HP's product portfolio and $3 billion tagged for research and development.
The CEO said the company expects free cash flow of $6 billion to $6.5 billion in its 2014 fiscal year, of which at least half will be returned to shareholders.
Whitman said that HP was at risk of falling behind when she took over. At last fall's Gartner Symposium, analysts peppered Whitman with questions about HP's disarray, singling out its lack of presence in the mobile market and the thousands of employee layoffs it had just announced. She said she is now "comfortable" with the company's improvements and promised industry-leading growth by 2016.
In addition to becoming more comfortable with the company's direction, Whitman's outlook has undergone other changes in the last year as well. Through early 2013, the CEO remained publicly supportive of Windows 8. But Microsoft's OS has neither revitalized the PC market nor positioned Windows tablets as major players. Whitman began talking in the spring about the importance of new platforms and form factors.
In May, as more Chromebooks and Android devices began to populate the company's portfolio, Whitman said during a conference call with analysts that the company was shifting to produce the devices customers want. She didn't mention Windows 8 explicitly, but many observers inferred at the time that Microsoft and HP might not be on the same page.
The company remains heavily invested as a Microsoft OEM, and released new enterprise laptops earlier this month. But Whitman reiterated Wednesday that HP's dynamic with Microsoft and other traditional partners had changed. "Current partners like Intel and Microsoft are turning from partners to outright competitors," she said.
Indeed, Microsoft's Surface tablets now compete with HP's offerings, and Microsoft and HP compete in many of the same enterprise software and services markets. With Cisco, IBM, Oracle and a newly private Dell among the others in the same space, HP will be under pressure to get ahead of the competition with some of its newer technologies, such as its Moonshot hyperscale servers or its growing array of cloud products.
Server Market SplitsvilleJust because the server market's in the doldrums doesn't mean innovation has ceased. Far from it -- server technology is enjoying the biggest renaissance since the dawn of x86 systems. But the primary driver is now service providers, not enterprises.
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