Whitman to take HP on five-year "journey" of recovery

HP boss admits turnaround will take time as share price tanks to nine-year low

HP's share price has crashed to a nine-year low after chief executive Meg Whitman warned it would take five years to revive the ailing firm's fortunes.

In an HP Securities Analyst meeting last night, Whitman issued an outlook below Wall Street expectations and signalled that things would get worse before they got better, sparking a 13 per cent share slide.

"All of this is fixable but it is going to take some time," she said.

Whitman, who became HP's third chief executive in as many years when she took the reins last September, laid out a five-year "journey" that would see HP regain its edge as an industry-leading company in its fiscal 2016.

Fiscal 2013, which begins on 1 November, will be a "fix and rebuild" year and will be marked by a broad-based profit decline, she warned. Adjusted earnings are set to hit $3.40-3.60 a share next year, well down on the $4.18 forecasts by analysts, according to Thomson Reuters.

HP's recovery will begin in its fiscal 2014 before a period of acceleration - where revenues should be growing faster than cost - occurs in fiscal 2015.

Whitman's brutally honest forecast sparked the biggest single-day drop in HP's already pallid share price since August 2011.

HP's market valuation has now plunged by over two-thirds since 2010, when the firm was worth more than $100bn.

"My belief is that the single biggest challenge facing [HP] has been changes in CEOs and executive leadership, which has caused multiple inconsistent strategic choices and frankly some significant executional miscues," Whitman told analysts.

"This is important because as a result it is going to take longer to right this ship than any of us would like."

The firm also cited macroeconomic headwinds - particularly in Europe - and competitive pressures - as it ran through the challenges that have caused revenues and profits to fall in recent quarters.

The chief executive of one of those competitors - John Chambers - stuck the boot in last week by saying he would have told former political heavyweight Whitman not to take the job.

HP admitted it had focused on too many products, services and geographies and had not aligned its cost structure with its revenue trajectory. A "significant" underinvestment in R&D had also impacted the business, while its direct and partner go-to-market model needs "renewed focus", it added.

Phil Doye, chief executive of HP Gold partner Kelway, was among those to voice his frustrations on twitter last night.

"As a partner and shareholder of HP I support what Meg is trying to do but with shares [down 12 per cent] and at a nine-year low it is difficult to be optimistic," he said.

Clive Longbottom, services director at analyst Quocirca, said HP's failure to ensure a proper handover between any of its recent bosses had irked employees and channel partners, and confused customers.

Whitman cannot say 'give me more time'," he said. "She's been there for around a year, and the markets want a proper roadmap. The markets move too fast for a five-year plan to have any real meaning - the markets want a rolling 12 week plan with targets set no more that 12 months off, visions two years out and prayers five years out.

"With IBM still strong, Dell morphing rapidly into a real competition, and Cisco, Oracle and others all snapping at HP's heels, time is a luxury Whitman does not have."