What Many People Are Missing About HP..including you!

What Many People Are Missing About HP

On October 3, HP held their Securities Analyst Meeting, which I attended in person at the Concourse Exhibition Center in San Francisco. This is a day, like all major public companies have, where senior management discusses their plans for the future with the major institutional investors. Based upon the reduced stock price afterwards, the message didn’t please financial analysts. I heard the same content as everyone else and some of it wasn’t pretty, but I also think people missed a lot, too.
I am an industry analyst, not a financial analyst, which means I am looking at companies, products, and technologies through a different lens. A spreadsheet isn’t my primary lens, it’s nearly 25 years’ experience of watching the relationships between buyers, products, markets, technologies and the companies who deliver them. Through that lens, I saw the following:

 

Openness, Honesty, Humility
I have sat through more corporate presentations than I can even count. Most of them involve mountains of industry jargon, big flowery words, and a complete denial that challenges exist. Big business has become a culture of spin, and therefore these kinds of meetings provide a lot of that. I can’t blame some companies for sticking to a positive message, as financial analysts bite on negativity like a dog biting onto a towel and never letting go.
While HP’s presentations contained a little corporate-speak, they provided an honest assessment of where the company is, where it came from, and where it is going. When HP didn’t know the answer, its execs said it straight and didn’t spin it. Whitman was criticized a bit for talking about prior regimes as part of the issue, but the fact is that having that many CEOs in that short of time, 7 CEOs in as many years, does create utter chaos. If you have ever worked in a large corporation, you would know that. I have never seen this level of honesty from any company this size and I applaud HP for it. Others should, too.
Forecasted $7B Profits for 2013
During the meeting, HP talked quantitatively and qualitatively about the present state of its businesses. They also talked about the future. For 2013 HP forecasted $7 billion in profits, specifically $3.40- 3.60 EPS and also $5 billion in free cash flow. How does this compare to other companies? Here is a smattering of a few select companies’ latest annual profits:

Lenovo $0.273B	HP $7B
Dell $3.5B	Cisco $8B
EMC $2.5B	Oracle $10B
SAP $4.5B	Google $9.7B

While HP has a ways to go to catch up with IBM, most companies would kill for $7B in annual profits.
Impressive Share in Many Markets
Sure, HP has its challenges as they acknowledged, but another big thing people fail to recognize is how successful HP is in so many markets when measured by market share. In most of its product markets, HP is #1 or #2 by revenue and/or market share, in servers, PCs, workstations, printers (laser and inkjet), software (quality, infrastructure & operations management, big data with Autonomy), and service lines of business such as storage.
Here is some data that comes straight out of HP’s SAM presentations and from Q1/Q2 IDC numbers:

Servers, Storage, Networking: #1 server vendor in shipments for 10+ consecutive years #1 x86 server vendor in revenue and units for 16+ consecutive years #1 x86 blade vendor in revenue and units for approximately six years #2 branded tape drives #4 external disk storage systems #2 in external storage revenue in EMEA #2 switch share WW in revenue at 11.5% and ports at 18.2% #1 switch share in China at over 30% revenue share #2 Ethernet switches share #3 wireless network revenue share #2 router revenue share

Software: #6th largest software company in the world #1 distributed systems management software #1 automated software quality #1 enterprise search and discovery #1 archiving PCs and Printers: #1 PC market share, including workstations #1 workstations #1 desktops #1 notebooks #1 laser printers #1 printer supplies #1 graphics printing #3 printing software and services

Absent in the SAM presentations were market share figures on enterprise services, but even without this, the share stature speaks for itself. HP is #1 or #2 share in a mind-boggling amount of markets.
HP Said it would Take 5 Years
In scanning the articles and financial analyst briefs after HP’s SAM, one thing that I thought was puzzling was the amount of people who were surprised that Whitman said it would take 5 years to turn around HP.