Can Meg Whitman’s Mad Scientist Strategy Keep Working at HP Enterprise?
Meg Whitman has been running one version or another of the venerable tech giant Hewlett Packard for more than five years. And with all the acquisitions and divestitures and splitting the company in half and spinning off other bits, she sometimes seems like the mad scientist CEO of the industry.
About a year after her most momentous restructuring of all—pushing HP’s personal computer and printer businesses into a wholly separate company—she’s still hard at work rejiggering the pieces left on her board. Just two months ago, she announced a new plan to spin off and merge some of HP’s software businesses with British vendor Micro Focus in a deal valued at $9 billion. A similar deal announced in May to send the enterprise services unit to Computer Sciences (CSC) is still not done. She also moved to add supercomputer maker SGI in August.
But it would be hard to criticize all those moves right now. Whitman’s company, Hewlett Packard Enterprise has seen its share price rise 60% since splitting from the PC and printer side last November.
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Still, some Wall Street analysts are worried that the recovery and restructuring effort may be running out of juice. Third quarter results, the company’s fiscal fourth quarter, showed revenue dropping 7%. Even after adjusting for all the units Whitman cut and the strengthening U.S. dollar, revenue still declined 2%. The $12.5 billion total missed analysts estimates of almost $12.9 billion. Adjusted earnings per shares of 61 cents about met analyst expectations. HP’s share price lost 1% in after hours trading.
The problem was that sales in some of HP’s (HPE) older, declining businesses—like traditional servers used in corporate data centers and basic networking gear—dropped more than expected, Whitman said. Growth areas like flash-based network storage hardware, extreme high performance computers and wi-fi gear for big installations still grew strongly, she said.
Still, with company-wide growth slowing, Whitman was peppered with questions on a call with analysts about the assumptions underlying her outlook for next year, including growth in server sales overall of 1% to 2%.
Meg Whitman: Turning Around HP Was Easier Than Running for Governor
The CEO explained that she had gone for revenue growth earlier in 2016 but emphasized profitability more in the last two quarters. “We sort of titrated a bit during the year,” the mad scientist CEO said, using chemistry lingo for mixing two solutions to find a balance. “First half was faster growth, lower margins, second half of the year was lower growth, higher margin. Now we’ve got to drive down the middle of the highway for next year.”
Investors would like to see both profitability and growth, if Whitman’s middle of the highway approach is to succeed.