Less than a month after announcing the largest quarterly loss in its history, HP’s shares yesterday lost 13% in one day, falling to a ten year low. The company’s market capitalisation has now declined more than US$90 billion in three years, and lost one third of its value since CEO Meg Whitman took over a year ago. HP announced a US$8 billion loss last quarter, mostly from writing down the value of its unsuccessful acquisition of EDS.
The bloodbath occurred as a direct result of comments from Whitman, in a day long meeting with Wall Street analysts (Overnight Australian time). In that meeting she dumped on her company in a way few CEOs in history ever have.
So severe was her self-criticism that most analyst speculated it could only have been deliberate, an attempt to get all the bad news, and all the subsequent financial grief, over with in one go. Yes, very bad news, but it will make any subsequent recovery look all that much better. Great idea, but it doesn’t seem to be working out that way.
She and other HP senior executives spoke for nearly a full day, plenty of time to deliver bad news but also more than enough time to say what they would do about reversing the company’s fortunes. Whitman blamed management upheavals for many of the company’s problems – fair enough, after the revolving door of CEOs and their vastly inconsistent strategies over the past decade.
She blamed the poor state of the PC market. “We’re not the only company having trouble in that market.” Well, no, but some companies, like Lenovo, are doing well, and the tablet market – where HP has tried and failed – is booming. She also blamed HP’s lack of innovation in recent years.
Whitman’s solution? “Fix and rebuild”. Next year will be “recovery” and the year after that “acceleration”. That puts some meat on the bones of her recent comments that the turnaround will take some time, but Wall Street likes its predictions in months, not years. The tyranny of the quarterly results is alive and well.
Whitman is promising new products, but fewer of them, and a return to HP’s reputation for quality and innovation. “Innovation is alive and well at HP. We need to work a lot harder to get those ideas productised and commercialised and into the market much faster.” She said the company is spending more on R&D and will develop a range of new products (another tablet, for example, has already been announced).