HP Remains Cautious On Its Prospects for Fiscal 2014

On November 14, 2013, Hewlett Packard reported on its business performance for the fourth quarter of 2013. Included along with the otherwise positive assessments of current performance from its CEO, Meg Whitman, were some forward looking remarks more likely to be made by a CEO of a business somewhat unsure of its future performance.

These remarks can be found in the Q4 2013 HP Quarterly Earnings Webcast. Katy Huberty of Morgan Stanley asked the first question: ” . . . Does the fiscal 4th quarter revenue performance give you any confidence that there is, at least, an opportunity to perform better on the revenue line than you had originally planned for fiscal 14.” Meg Whitman, CEO, replied to this question. She emphasized that ” . . . the characterization that we laid out at the Security Analyst meeting just six weeks ago remains the same.”

Ms. Whitman used the next couple of sentences of her reply to add a couple of specific impediments to a “better” forecast for fiscal 2014, which would otherwise make sense following on a quarter where almost all targeted objectives had been achieved. These impediments include ” . . . macro economic headwinds, almost across the board . . . “, and a need to further improve their “go to market” strategy. What caught my attention was a curious comment: Ms. Whitman noted ” . . . it’s prudent to characterize the business the exact same way we did at the Security Analyst Meeting.”

So, if the CEO is not prepared to provide any forward guidance beyond the ” . . . exact same way we did at the Security Analyst Meeting”, then I can’t help but think management is either fundamentally unsure about how “macro economic headwinds” are going to impact the bottom line, or, somehow, the fourth quarter, 2013 performance was not nearly as impressive as it would otherwise appear to be.

At least 2 weeks remained in the actual fiscal fourth quarter after the Security Analyst Meeting. Based on Ms. Whitman’s comments, nothing new has transpired since the meeting. I’m skeptical about the HP 4th quarter 2013 report based on these remarks.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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