Fixing HP: Highlights of HP’s Financial Analyst Meeting

    Boy, what a difference a year makes. The last time I watched HP present the state of the company a year ago, it was anything but a best practice. The individuals, in some cases, showcased well, but the company looked like a mess. This year, things are very different. Meg Whitman’s CEO talk was one of the best I’ve ever seen from the standpoint of pacing, execution and content. As I listened to the talk, I clicked off best practice after best practice. It is incredibly important to do this well because the CEO sets the tone. If she does poorly, the business managers aren’t motivated to do better and the entire event can come apart. This year, HP felt like a team with a strong leader setting the pace, each business unit moving to match her execution and to dovetail with her talk. Last year was a discord of non-aligned executives, some of whom appeared to be in rebellion. This year was a concert of artists playing Whitman’s tune. HP suddenly looks more like a company that can win and less like a mess of badly herded cats.

    Let’s talk about that this week.

    Whitman’s Opening Talk

    The CEO talk sets the tone for an event like this and while I watched Meg Whitman, I remembered back to a similar event when Carly Fiorina was running HP. Fiorina was far more marketing focused than Whitman and a far more accomplished presenter; at the time, she was the only other CEO in Steve Jobs’ class. However, where Fiorina failed and Whitman succeeded was in getting HP to stand behind her. Fiorina understood what needed to be done but couldn’t get her people to do it. The event degraded sharply after Fiorina’s talk. I can still remember her look at some of the following speakers, which suggested that if she could have ripped their heads off, she would have. Whitman’s presentation quality isn’t at Fiorina’s level, but she is far more of a team player, which resulted in a far stronger event.

    This is kind of like the difference between seeing a concert with a superstar who makes the band look bad and a concert where the orchestra creates magic. A large company is more like an orchestra. Whitman’s presentation focused not on what she had done, but what her team had accomplished. This assignation of credit not only set the stage excellently, it made HP appear far stronger as a team. The stock market spiked during her talk, suggesting that it was very successful.

    The talk was content rich in the first 15 minutes, focusing on HP’s big successes, followed by a high-energy video about the time when folks usually drift to email, and then it moved to specific problems and the plans and progress to fix them. It set the stage for those that followed.

    HP Services

    One of the biggest problem areas for HP is services. This is because the EDS merger was massive. Large mergers are almost impossible to do well. In addition, Mark Hurd, one of Whitman’s predecessors, over-cut this business in an effort to automate it. The problem is that services is a people business and it has resisted automation so far; the end result was a cost-effective business that was failing because of this excessive focus on cost and an inadequate focus on building the people. Since this was the biggest problem area for HP, and because it had been so badly damaged by foolish strategy, this was the earliest business covered. HP executives showcased that they fully understood the problem and showed metrics as to progress against a strategy to restore the business and undo what Hurd had done. This presentation was done by Mike Nefkens and JJ Charhon, who did an excellent job of talking about the problems and the progress that has been made to correct them.

    HP Software

    One of the big potential areas for growth is HP’s software unit. Hurd also had cut this area sharply, largely because he didn’t seem to understand it and because, initially, it was run by his predecessor’s heir, who was forced out of the company. In addition, during Whitman’s immediate predecessor’s term, Autonomy was purchased. This company was misrepresented during the sale, creating a massive problem for HP because it was one of the most expensive acquisitions ever made. Once again, the presenter, George Kadifa, showcased knowledge of the problems and progress in correcting them. These improvements included creating an agile software operating model, improving the leadership executive bench, improving the customer experience (from SaaS to online), unifying systems and processes, simplifying the infrastructure, and increasing productivity and innovation. Proof points included 174 new patents and 78 million unsuccessful intrusion attempts due to HP’s security offerings.

    He then talked about HAVEn (Hadoop, Autonomy, Vertica, Enterprise Security, and nApps), the largest integrated big converged solution currently in the market. The software unit has over 50,000 customers and 94 percent of the Fortune 500, which is kind of impressive for a unit that had nearly been killed a couple of years ago.

    HP Enterprise Group

    This was likely one of the most anticipated presentations of the day, largely because it was done by Bill Veghte, who came out of Microsoft, a company HP is increasingly viewing as more competitor than partner. His message was on convergence and the pool of resources, server/storage/networking, that can be software defined. Software plays the major role in executing this converged strategy, which is why Bill Veghte was selected to run the group. Software is the glue that makes this all work. He argues that no other vendor has the breadth that HP has, and to get strategic advantage, all components have to seamlessly work together. Thus the “glue” is the most important part.

    This is a complex area, very rich (some might argue too rich) in individual products. He covered workload optimized servers, software-defined networking, converged storage, converged architecture and automation, and converged cloud. He argued that what the group needs to do is increase speed and focus, simplify the business, and have the tenacity to keep fighting.

    He then drilled down into the different areas. This segment almost became a briefing in and of itself, with more of the depth that you would expect from a CEO rather than a division head. I think this reflects that this division is actually very close in structure, though not size, to IBM. It’s almost a company within a company. Proof points:  1,900 enterprise customers working with HP on cloud services (either using or deploying), and 37 percent of Fortune 500 on HP’s cloud.

    As an interesting side note, Veghte had more stage time than Whitman and is clearly on the short list of executives to replace her when she eventually steps down. He is in the most pivotal position and his content raised him to a level necessary to be eventually accepted as CEO.

    In my next post, “HP and Meg Whitman’s Vision for Its Future,” I’ll continue with the Printing and Personal Systems, the CFO’s presentation, and final thoughts from this event.

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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