Today at HP's HPQ 2013 Securities Analyst Meeting, the company's leadership
team provided an update on HP's progress executing against its
turnaround plan and future strategy.
HP's president and chief executive officer Meg Whitman reviewed the
accomplishments of the past year -- a "fix and rebuild" year --
noting that the multi-year turnaround remains broadly on track. In
particular, the company:
-- Has met or exceeded quarterly non-GAAP diluted earnings per share
(EPS) outlook since the turnaround plan began through Q3 of fiscal
2013.
-- Provided outlook in August that HP expects free cash flow to approach
$8 billion by the end of FY13.
-- Reduced operating company net debt by almost $8 billion over the past
12 months, approaching a goal of zero.
-- Recommitted to smarter innovation, with research and development
(R&D) spending expected to be in excess of $3 billion in fiscal
2013.
"While there is a lot more work to be done, I am confident about the
progress we are making," said Whitman. "We're producing tangible
results, strengthening our balance sheet and delivering innovative
products across all our key segments. We are implementing the changes
needed to support our multi-year turnaround journey, reaffirm HP's
leadership position, and create enduring value for customers as well
as for our shareholders."
The core of HP's strategy is focused on providing unique technology
solutions for the "New Style of IT." HP has the combination of
hardware, software, scale and innovation to provide the integrated
solutions that help customers realize the full benefits of cloud,
security, big data and mobility.
While the company faces a challenging macro environment, shifting
market forces and a rapidly changing competitive landscape, Whitman
emphasized that the company has the right leadership team in place to
advance its strategy, drive innovation across the business and
improve its go-to-market execution. Whitman reiterated that she
expects HP's revenues to grow in line with gross domestic product
(GDP) over the long term.
2014 outlook
Cathie Lesjak, HP's executive vice president and chief
financial officer, provided a financial outlook for fiscal 2014. With
pockets of growth helping to offset continuing challenges in the
macro environment and weak public sector spending, HP expects the
year-over-year revenue decline in fiscal 2014 will moderate from
fiscal 2013.
HP anticipates operating profit dollars to be flat to up
year-over-year in fiscal 2014, due to its continued focus on cost
savings and operational efficiency. The company estimates non-GAAP
diluted EPS for fiscal 2014 to be in the range of $3.55 to $3.75. HP
estimates GAAP diluted EPS to be in the range of $2.85 to $3.05 for
fiscal 2014. Fiscal 2014 non-GAAP diluted EPS estimates exclude
after-tax costs related primarily to the amortization of purchased
intangible assets and a restructuring charge of approximately $0.8
billion.
HP expects to generate approximately $9 billion to $9.5 billion in
cash flow from operations in fiscal 2014. After deducting estimated
fiscal 2014 capital expenditures, the company anticipates free cash
flow of $6 billion to $6.5 billion in fiscal 2014.
Lesjak articulated the company's long-term commitment to financial
discipline and a returns-based capital allocation strategy. In fiscal
2014, the company is expecting to return at least 50% of free cash
flow to shareholders through dividends and share repurchases.
In addition, HP will invest in its product portfolio to accelerate
high-growth areas in the New Style of IT. HP plans to reinvest
approximately $0.12 per share of savings from its restructuring
program into the business in fiscal 2014, including products and
solutions such as 3PAR, networking, Vertica and cloud solutions.
A copy of Lesjak's presentation materials accompanies this release.
Business segment strategies
Over the course of the day, HP's
management team also laid out updated strategies for the company's
business segments, including:
Printing and Personal Systems
-- Dion Weisler, executive vice president of the Printing and Personal
Systems (PPS) business, and Steve Nigro, senior vice president of the
Inkjet and Web Solutions Business, part of the Printing business, gave
an update on PPS. Personal Systems continues to see traction in
commercial, where it outgrew the market in the most recent calendar
quarter over the same period last year. Printing continues to build on
its long-standing market leadership across both ink and laser and
introduced a number of new breakthrough products in both categories
during fiscal 2013.
-- In fiscal 2014, PPS will focus on continuing to deliver on its
leadership in traditional markets as well as driving product
innovation and developing print solutions that address the New Style
of IT. PPS' priorities include profitable growth through greater
segmentation, continued product innovation and using its leadership
position in commercial to address opportunities in mobility, cloud and
security.
Enterprise Group
-- Bill Veghte, executive vice president and general manager of HP's
Enterprise Group (EG), discussed the company's opportunities in the
$221 billion enterprise infrastructure market. As enterprise customers
move to a New Style of IT, requiring more compute, more storage and
more bandwidth, they will need solutions built on modern architectures
and innovations designed for the future.
-- Veghte acknowledged executional challenges facing the HP EG business
and provided a detailed plan to accelerate execution against great
business opportunity -- highlighting adjustments to leadership,
operating model, route-to-market, and product and solution portfolio.
-- Veghte also gave a strategic overview of HP Converged Cloud and
pointed to significant momentum in the past year as enterprises are
rapidly adopting HP's hybrid cloud strategy. More than 1,900
enterprise customers have turned to HP for their hybrid cloud solution
in the past year, representing approximately 60% year-over-year
customer growth.
Enterprise Services
-- Mike Nefkens, executive vice president and general manager of
Enterprise Services (ES), and JJ Charhon, senior vice president and
chief operating officer of ES, provided an update on how ES has made
progress on improving operations and better aligning costs with
business objectives during the first three quarters in fiscal 2013.
-- Key priorities for fiscal 2014 include a focus on the buildup of
advisory and transformation offerings, world-class service delivery,
revitalization of the sales engine, and ongoing cultural
transformation across the organization.
-- ES revenue is expected to decline 4% to 6% year-over-year in fiscal
2014. However, a sharp focus on operational improvements is expected
to drive an improved operating margin of 3.5% to 4.5%. ES maintains
its long-term financial model of 3% to 5% revenue growth, an operating
margin rate of 7% to 9% and return on invested capital of 15% to 25%.
Software
-- George Kadifa, executive vice president of Software, spoke about how
Software is enabling the New Style of IT and accelerating HP's ability
to capture attractive market opportunities. The business is driving
profit expansion, while disrupting markets with the breadth and depth
of its technology offerings.
-- Looking forward, Software will focus on its differentiated strategy
and strong product portfolio as well as continued operational
improvements. HP estimates the total addressable enterprise software
market is growing at a compound annual growth rate of 8% and by 2016,
expects that market to be $69 billion.
Webcast details
A webcast of today's event, along with management
presentations and other materials, is available at
www.hp.com/investor/SAM2013. This press release contains only a
summary of some of the information being presented at today's event
and should be read in conjunction with the management presentations
and other materials made available on that website.
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