During today’s quarterly conference call, Meg Whitman admitted that HP has some big cost cutting in front of it.”Our current cost base isn’t sustainable,” she said. “For years we’ve been running our business in silos. But it’s too complex and too slow.”
Although she said that the “obvious costs were dealt with in recent years” she will be looking for ways that the company can “standardize, optimise and automate many of our systems.”
That’s an ironic need for a company that sells outsourcing services to enterprises, as well as management and IT automation technologies.
However, it looks like she’s looking to trim products, not people.
Whitman said that after six months on the job, she’s divided HP’s problems into three buckets.
- Fixing execution. She wants to get the “right people and processes” in place including automating more of the supply chain and upgrading the company’s sales processes. The company has too many “SKUs” in each product line which “leads to complexity” in managing and selling products.
- Fix ongoing issues in each business unit. She cited the PC group, PSG, as an example. “We didn’t make the investments we should have in the past few years to stay ahead of costs, customer expectations and trends,” she said. And because of that the company has seen revenues and profits “eroding.”
- Come up to speed on emerging technologies. She named cloud computing, security, information management as the top three priorities.
“We are building HP to last, not for the next quarter but for decades,” she said, and she insisted she planned to be around for a good chunk of time. “The more time I spend listening and learning, the more committed and passionate I’ve become.”
The company offered this guidance for its next quarter: between $0.68 and $0.71 GAAP EPS, and and $0.88 to $0.91 non-GAAP.
The company has confidence that its second half will be better than its first and so HP has not changed its full year FY 12 guidance. The company is predicting $3.20 EPS GAAP and $4.00 non-GAAP.
She predicts that HP’s revenue will stop declining in 2013, and start growing again after that.
“A lot of this is in our own hands,” she says. But these types of turnarounds “are not done in less than two years. Often they take, three, four, five years. It took us a while to get into this. It’s going to take us a while to get out.”