HP switches key executives, dashes hopes for 2014 revenue growth
SAN FRANCISCO (Reuters) - Hewlett-Packard Co shuffled its top ranks on Wednesday, reassigning a star executive to a new role identifying potential acquisitions, as the world's largest personal computer maker reported a larger-than-expected slide in revenue and forecast zero sales growth next year.
Its shares dropped 5 percent in after-hours trading.
The Silicon Valley stalwart, which has been undergoing a radical reshaping under Chief Executive Meg Whitman for the past two years, is looking for ways to escape the decline in PC sales as tablets and smartphones revolutionize computing.
Whitman, who said in May that fiscal 2014 revenue growth was still possible, told analysts on a Wednesday conference call that growth next year was now "unlikely" given the poor performance of the Enterprise Group and PC divisions.
"My read was that fiscal 2014 growth was a stretch goal rather than a baseline assumption," said Shebly Seyrafi, an analyst at FBN Securities. "That has become more challenging."
To meet that challenge, Whitman made a key personnel move on Wednesday, replacing Dave Donatelli with Bill Veghte at the helm of HP's second-largest business division, the Enterprise Group.
Donatelli, a rising star that Wall Street analysts once considered a candidate for a tech CEO position, relinquishes his post as chief of the unit, which sells server, storage and software services to large organizations. He will now focus on identifying early-stage technologies for investment, the company said.
The executive engineered some of the company's most significant acquisitions in past years, including of 3Com and 3PAR, which helped catapult HP deeper into the networking and storage markets, respectively.
Whitman told analysts on the conference call the computing giant was "back in the market" for strategic acquisitions, which she saw as essential to a continued transformation.
Veghte takes over immediately as head of the division, and will not be replaced as HP's chief operating officer. Veghte joined HP in 2010 after a 20-year career at Microsoft Corp, which culminated in his heading the business side of the Windows unit. He also worked on developing and marketing Microsoft's server software.
CEO Whitman, who took the reins at HP in September 2011, is trying to revive the company after years of board turmoil and a backdrop of rapidly declining global PC sales, but has not yet halted revenue declines.
Donatelli is the latest executive with a strategic role to have been replaced. In June, HP moved PC division chief Todd Bradley into a new job aimed at improving its China business and distribution relationships around the world, a move many analysts deemed a demotion.
The Enterprise Group is HP's largest business unit after personal computers, and is a critical component of Whitman's efforts to boost margins and profitability, while trying to minimize revenue declines.
The division, which recorded a 9 percent decline in sales in the latest quarter, accounts for about a quarter of the company's overall sales.
In all, the company recorded revenue of $27.2 billion in the fiscal third quarter, down from $29.7 billion a year earlier, as PC sales continued to slide amid a shift toward mobile computing, and its enterprise business grappled with tepid worldwide information technology spending.
It missed the $27.3 billion in sales that Wall Street had expected, on average.
Overall net income in the quarter came to $1.39 billion or 71 cents a share, compared with an $8.9 billion loss a year earlier when the company swallowed a big writedown of the IT outsourcing business it inherited when it bought Electronic Data Systems for close to $14 billion in 2008.
Excluding one-time items, the company earned 86 cents a share, matching the 86 cents average forecast by analysts on Thomson Reuters I/B/E/S.
Shares in the company slid more than 5 percent to $24.07 in after hours trade, from a close of $25.38 on the New York Stock Exchange.
(Additional reporting by Bill Rigby in Seattle; Editing by Phil Berlowitz)