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

Research, Cloud

Whitman has been spending more on research and development and directing funds toward areas of the computing market where she says Hewlett-Packard can gain an edge, including managing growing volumes of business data and helping companies transition to cloud computing over the Internet.

While the research investment may pay off down the line, it’s partly responsible for the unexpected profit drop Hewlett- Packard projected for 2013, said Amit Daryanani, an analyst at RBC Capital Markets.

In the enterprise computing market, Oracle Corp. is creating a cloud service that lets companies rent processing power, storage, database software and business applications from the company instead of buying them outright, a threat to Hewlett-Packard’s server and disk drive businesses.

Microsoft Corp., International Business Machines Corp. and VMware Inc. are also vying to supply more of the platform software that can help companies switch to cloud computing.

Apple’s Lead

Bill Veghte, Hewlett-Packard’s chief operating officer, said that cloud revenue grew 39 percent to almost $4 billion in 2012 and would reach $8.4 billion by 2015.

Dave Donatelli, who leads the enterprise unit, said the company is developing data-center products such as a computer system that combines servers, storage and networking in the same chassis.

In the tablet market dominated by Apple’s iPad, Hewlett- Packard is seeking to appeal to corporate clients with an emphasis on security and the ability to run business applications. Hewlett-Packard said it will introduce a tablet for business users, the ElitePad 900, in January that runs Microsoft’s Windows 8 software.

In her drive to shore up profit hammered by sales of low- margin PCs, Whitman has announced plans to cut 29,000 jobs by the end of fiscal 2014 to save as much as $3.5 billion a year. Many of the reductions are from the company’s underperforming enterprise services unit, which former CEO Mark Hurd added with the 2008 acquisition of Electronic Data Systems. In August, Hewlett-Packard said it would write down the value of that business by $8 billion.

Revenue from enterprise services will drop as much as 13 percent in the next fiscal year, Hewlett-Packard said, citing the loss of revenue from four major accounts.

Bloomberg News

<< Page 3 of 3

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome