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10/10/2013
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HP's Whitman: Microsoft Now Our Rival

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.

[ Software-defined networks are a big part of HP's plans. Read HP Predicts Significant SDN Adoption By 2015 . ]

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.

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rhan301
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rhan301,
User Rank: Apprentice
10/11/2013 | 5:24:23 PM
re: HP's Whitman: Microsoft Now Our Rival
Hi Laurianne, I think your Twitter contacts are correct. Please see my comments above.

In the government contracting world, HP's purchase of EDS is seen as a debacle. In the consumer space their products seem "designed-to-fail."

I feel that the company hasn't decided on their identity, and is running from one quick fix to the other to keep revenue up. A leaner HP that is more focused on value to customers would have a better chance of surviving the coming revolution, where most desktops and laptops will be replaced by low-cost "ubiquitous computing" solutions using ARM processors.
rhan301
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rhan301,
User Rank: Apprentice
10/11/2013 | 5:11:34 PM
re: HP's Whitman: Microsoft Now Our Rival
Oh my... "Things are bad this year but wait until 2 years from now!" I believe that HP could only be successful in the business space, as they have destroyed their goodwill with consumers. I am literally surrounded by people who have purchased an HP printer or laptop within the past two years, and who then put up with features and interfaces slowly dying, causing no end of problems. And when they try to get warranty support HP demands an up-front payment before discussing their problem.

IMHO, HP bought a large consulting business and ran it into the ground, with many of their best and brightest getting fired ("laid off") or hastily exiting on their own.

IMHO, HP had a good tablet and dropped it when it wasn't an overnight success. And what ever became of the extremely expensive WebOS?

If you had an employee who ran their operation like this, how long would it take you to show them the door? HP doesn't stand a chance as long as Meg is at the helm.

My 2 cents!

/R.
cbabcock
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cbabcock,
User Rank: Strategist
10/10/2013 | 11:37:09 PM
re: HP's Whitman: Microsoft Now Our Rival
As a trusted, "non-partisan" vendor, HP has the potential to thrive as a cloud service provider. It hasn't donw so yet but I think its cloud efforts, its IaaS, will be a contributor to revenues and hopefully profits in 2015.
Michael Endler
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Michael Endler,
User Rank: Author
10/10/2013 | 8:40:14 PM
re: HP's Whitman: Microsoft Now Our Rival
Not enough! Still a big question mark. At this time last year, I remember people hounding her about when HP will get serious about smartphones. Question still stands today.
Laurianne
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Laurianne,
User Rank: Author
10/10/2013 | 7:05:52 PM
re: HP's Whitman: Microsoft Now Our Rival
Some of my Twitter contacts felt blaming Microsoft and Intel was too easy an out for Whitman. Do you agree with that sentiment?
Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
10/10/2013 | 6:31:41 PM
re: HP's Whitman: Microsoft Now Our Rival
HP is definitely feeling the snub of the Microsoft Surface devices and poor Windows 8 adoption. I'd be looking for new opportunities too.
Lorna Garey
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Lorna Garey,
User Rank: Author
10/10/2013 | 3:59:07 PM
re: HP's Whitman: Microsoft Now Our Rival
Did she say anything explicitly about HP's mobility strategy? Seems like that's still a question mark.
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