Hewlett Packard CEO Meg Whitman in Nov. 2013.
Photograph by Justin Sullivan — Getty Images
By Andrew Nusca
February 25, 2015

There’s no mincing words: Hewlett-Packard took one on the nose last quarter.

The soon-to-split tech giant (HPQ) released its first quarter 2015 earnings yesterday—lackluster sales, currency issues, the lot—disappointing investors and any observers hoping that CEO Meg Whitman would be able to improve the company’s execution as it steamrolls toward a bipartite future.

On the earnings call, HP’s executive team—Whitman, CFO Cathie Lesjak, VP Jim Bergkamp—played defense and worked to bat away any notion that the company’s overall trajectory is anything but on track. But it was hard to ignore the parade of wiggle words and phrases—”repricing,” “productivity,” “we have work ahead,” “need focus,” “below our expectations,” and a cascade of “headwinds”—that dulled any glimmers of hope for the rest of fiscal year 2015. Unsurprisingly, the company substantially lowered its outlook, at least based on what Wall Street was expecting.

But the word that stuck out the most? “Flat.”

“We still believe we can be flat in constant currency,” Whitman said.

“I’m optimistic that we will be flat in constant currency,” she said two minutes later.

She’d repeat the sentence several more times. Lesjak did the same.

Flat is the new up, I guess. For good reason: Much of HP’s woes came from currency movements abroad, where 65% of its overall business resides. As the U.S. dollar strengthens, activities abroad—particularly in Europe, the Middle East, and Africa, the region responsible for more than half of HP’s international sales—weaken. Add “aggressive pricing from Japanese competitors” in HP’s famed printing segment and shoddy execution in the company’s networking division and you’ve got a recipe for disappointment. Indeed, HP was expecting “two-point headwind” in 2015; it’s now expecting six. Currency issues alone are expected to reduce earnings by 30 cents per share, the executives said.

Whitman worked hard to reassure investors as the company approaches its 2016 split. “We’re about where we expected to be at this point in the journey,” she said early on during the call. “We are making great progress on the separation,” she said later during the call’s Q&A portion. “We are executing on all cylinders,” she added, before taking a step back: “Lots and lots of work ahead, but I feel good about where we are.” The executives didn’t elaborate very much about the financials of the two companies-to-be, but they acknowledged that they’d report them separately and concurrently.

At one point, an analyst asked Whitman to reflect on the impact of her “Playing to Win” strategy, drawn from the book of the same name.

“Organizations have a lot of trouble making choices, particularly at our scale,” she replied. “There are lots of ways to deploy strategy, but this has been particularly effective at HP, because everyone’s speaking the same language now.”

That language? “Flat.”

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