Whitman’s HP turnaround plan sends shares to 9-year low

‘Fix, Rebuild’

Next year will be a “fix and rebuild year,” Whitman said. “Innovation is actually alive and well at HP. We need to work a lot harder to get those ideas productized and commercialized and into the market much faster.”

Whitman’s argument is that chronic underinvestment in new products, a product road map that whipsawed customers through the tenures of various CEOs, and poor sales and HR planning systems have hobbled the company.

She’s projecting a smaller Hewlett-Packard -- one with fewer products, fewer people and lower profits. She’s ceding much of the growth in the consumer market to Apple Inc. and won’t take on the iPad maker directly in tablets. She also said she won’t ship a smartphone in 2013.

Whitman said she won’t spin off the PC business, a prospect contemplated by her predecessor, Leo Apotheker. The company should reconsider Whitman’s decision so that it can concentrate on products designed to help customers beef up cloud-computing operations, said Brian White, an analyst at Topeka Capital Markets.

Software, Enterprise

Most of the focus now will be on reviving the printing business to generate more cash, while expanding the enterprise computing businesses, Whitman said.

“The two growth engines of our company are going to be the software business and the enterprise business,” Whitman said. “Our customers make long-term investments. This start-stop of the last three years -- you can’t run the railroad that way.”

Fiscal 2014 will be a year of “recovery” and 2015 one of “acceleration,” she said.

The push to boost sales to corporate customers comes as China’s Lenovo Group Ltd. is poised to supplant Hewlett-Packard as the top PC supplier. Its share of PCs dropped to 14.9 percent in the second quarter, while Lenovo’s increased to 14.7 percent, according to Gartner Inc.

The PC market will expand less than 1 percent this year, the worst performance since it shrank in 2001, according to IDC, complicating Whitman’s turnaround effort. PCs may not grow until 2016, said Todd Bradley, head of Hewlett-Packard’s printing and PC business.

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