[h=3]By IAN SHERR And BEN WORTHEN[/h]SAN FRANCISCO—Hewlett-Packard Co. Chief Executive Meg Whitman outlined plans to bounce back from years of turmoil, but said profits will decline in the coming year before the turnaround effort gains traction.
The updated outlook spooked investors who recently shoved the company's shares down 7.8% to $15.77, continuing the company's share price decline of more than 37% so far this year.
Ms. Whitman, at a meeting of analysts here, said the company had finished what she considered the first year of a five-year turnaround plan that involved streamlining the Palo Alto, Calif. company's processes.
"H-P faces dynamic market trends we must address faster," Ms. Whitman said as she outlined the various challenges the company faces.
In the interim, Cathie Lesjak, H-P's chief financial officer, said the company expects its revenue to fall in each business segment, aside from software, while operating margin will decline as well.
The company expects fiscal year 2013 profits to be between $2.10 per share and $2.30 per share. Excluding restructuring costs and other items, the company expects profits of between $3.40 per share and $3.60 per share, well below average analyst expectations of $4.18 according to surveys by Thompson Reuters.
"There's a lot more work we need to do," Ms. Lesjak said, noting that revenue particularly in the company's enterprise services group would fall between 11% to 13% from the previous year.
Ms. Whitman acknowledged that a revolving door of chief executives and subsequent inconsistent strategies have hurt the company over the past few years. She said the company sells too many products and has too many people making decisions. As a result, she said the company wasn't creating the best products, and was losing the lead it had in its most successful businesses, such as printers. "We couldn't focus on products that could move the needle," she said.
H-P's analyst day comes roughly a year after Ms. Whitman took charge of the company following the tumultuous tenure of Leo Apotheker, who in less than a year as chief executive oversaw the $10 billion acquisition of Autonomy, a software company, and publicly said he was considering splitting off or selling its PC business--a plan later reversed.
The company has also faced increased competition from consumer giants such as Apple Inc., whose iPad tablets and MacBook laptops have become leading products within the industry. Meanwhile, Lenovo Group Ltd. has seen its sales grow to rival those of H-P, who was still the world's largest PC maker by unit shipments in the second quarter, according to surveys by industry analysts Gartner and IDC.
The company has also faced falling interest in printers among consumers, who have shifted from relying on paper to using their mobile devices instead. And servers have seen their prices fall along with desktop and laptop computers, taking margins along with them.
Ms. Whitman says she has been focused on steadying the ship, absorbing Autonomy, saying H-P will keep its PC business and writing down the value of its services arm, which was bolstered by the acquisition of EDS four years ago. She said she has also overhauled internal processes, such as sales and human resources, to streamline them across the company.
She also said the company's specialized products, such as those for networking and high-end storage, will help to differentiate the company as it continues its turnaround. "We have to demonstrate a will to win," she said.
Write to Ian Sherr at [email protected] and Ben Worthen at [email protected]
The updated outlook spooked investors who recently shoved the company's shares down 7.8% to $15.77, continuing the company's share price decline of more than 37% so far this year.
Ms. Whitman, at a meeting of analysts here, said the company had finished what she considered the first year of a five-year turnaround plan that involved streamlining the Palo Alto, Calif. company's processes.
"H-P faces dynamic market trends we must address faster," Ms. Whitman said as she outlined the various challenges the company faces.
In the interim, Cathie Lesjak, H-P's chief financial officer, said the company expects its revenue to fall in each business segment, aside from software, while operating margin will decline as well.
The company expects fiscal year 2013 profits to be between $2.10 per share and $2.30 per share. Excluding restructuring costs and other items, the company expects profits of between $3.40 per share and $3.60 per share, well below average analyst expectations of $4.18 according to surveys by Thompson Reuters.
"There's a lot more work we need to do," Ms. Lesjak said, noting that revenue particularly in the company's enterprise services group would fall between 11% to 13% from the previous year.
Ms. Whitman acknowledged that a revolving door of chief executives and subsequent inconsistent strategies have hurt the company over the past few years. She said the company sells too many products and has too many people making decisions. As a result, she said the company wasn't creating the best products, and was losing the lead it had in its most successful businesses, such as printers. "We couldn't focus on products that could move the needle," she said.
H-P's analyst day comes roughly a year after Ms. Whitman took charge of the company following the tumultuous tenure of Leo Apotheker, who in less than a year as chief executive oversaw the $10 billion acquisition of Autonomy, a software company, and publicly said he was considering splitting off or selling its PC business--a plan later reversed.
The company has also faced increased competition from consumer giants such as Apple Inc., whose iPad tablets and MacBook laptops have become leading products within the industry. Meanwhile, Lenovo Group Ltd. has seen its sales grow to rival those of H-P, who was still the world's largest PC maker by unit shipments in the second quarter, according to surveys by industry analysts Gartner and IDC.
The company has also faced falling interest in printers among consumers, who have shifted from relying on paper to using their mobile devices instead. And servers have seen their prices fall along with desktop and laptop computers, taking margins along with them.
Ms. Whitman says she has been focused on steadying the ship, absorbing Autonomy, saying H-P will keep its PC business and writing down the value of its services arm, which was bolstered by the acquisition of EDS four years ago. She said she has also overhauled internal processes, such as sales and human resources, to streamline them across the company.
She also said the company's specialized products, such as those for networking and high-end storage, will help to differentiate the company as it continues its turnaround. "We have to demonstrate a will to win," she said.
Write to Ian Sherr at [email protected] and Ben Worthen at [email protected]