Can Meg Whitman turn things around for HP?

Hp didn’t hang around with its plan to oust former CEO Leo Apotheker less than a year at the helm, and appointed Meg Whitman as new CEO!

HP appointed Whitman as CEO after the stock markets close this on Thursday afternoon. She is now one of the company’s many official CEO’s. HP has had seven different CEOs since 1999, and its most recent one, Leo Apotheker, has only been in his position for 11 months but is Whitman the right choice to turn things around for the company.

Deutsche Bank analyst Chris Whitmore:

Despite Whitman’s many accomplishments, it is not obvious she brings the deep operational acumen (supply chain, logistics, hardware / technical background, etc.) necessary to avoid the missteps of her predecessor – particularly in this environment. In addition, we believe the risk of management defection (particularly senior execs now passed over twice) is particularly acute.

Sterne Agee analyst Shaw Wu:

While we believe Meg has proven to be a very capable manager leading eBay from a start-up into a household name and one of the largest Internet companies, there will be plenty of scrutiny given her lack of experience in the enterprise business. Her 30-year career has been in the consumer space including at eBay, Disney, Proctor & Gamble, Hasbro, Stride Rite, and FTD. Frankly, it is too early to predict whether she will be a success or not as time will tell. Nonetheless, we believe Meg faces a learning curve in picking up the enterprise business and supply chain management including component suppliers, contract manufacturers, and distributors.

Collins Stewart analyst Louis Miscioscia:

When Apotheker was hired, the thought on HP was that all the core businesses were fundamentally sound. However, the big issue became not just slow growth in the PC area (32% of rev, only 12% of profit), but that the Services business (28% of rev, 36% of profit) had material problems. Subsequently Services margins were guided down to 12% from 17% & the turnaround was suggested to take 12-18 months. As we have said before, Services is a tough business to turn around, and agree it could take multiple months, or even years to materially improve the operation. Thus, changing leadership won’t provide a quick fix here.

FBN Securities analyst Shebly Seyrafi:

Investors may wonder whether a former Internet (eBay) CEO is the right person to run a company with large positions in computing hardware. After all, such a concern was raised when a software CEO (Apotheker) was hired to replace Mark Hurd. On the positive side, Ms. Whitman (formerly a candidate for Governor of California) is known to have strong communications skills and obviously has many connections in the Valley. Still, we wonder whether David Donatelli (EVP/GM of ESSN) or Todd Bradley (EVP/PSG) would have been better picks due to their longer experience in the hardware part of the industry.

Barclays Capital analyst Ben Reitzes:

In terms of major concerns, Whitman cited HP’s talented employees but mentioned the company may lose some people. We believe the Board and Whitman need to move quickly to secure key executives like David Donatelli, Executive VP and General Manager – HP Enterprise Servers, Storage, Networking and Technology Services, Vyomesh Joshi, Executive VP, Imaging and Printing Group and Todd Bradley, Executive VP, Personal Systems Group. Whitman and Lane did not address (and will need to eventually re-address) how the company plans on improving its margins and execution in key businesses like services. Another issue that seems increasingly important is sharp drop off in server sales, particularly Unix servers – which carry profitable maintenance streams.

Stifel Nicolaus analyst Aaron Rakers on the PC spinoff.

The company reiterates (and strongly emphasized) its pending expensive (~9x EV/sales) acquisition of Autonomy as it looks to be a leader in the management of unstructured digital content going forward – we believe investors will continue to struggle with this move given its size and the company’s further leverage (net debt to stand at ~$10 billion; ~$6 billion exiting the July quarter plus this week’s $4.6 billion financing). The company also stated that its decision on spinning-off the PSG (PC) operations would be completed by the end of C2011, while also stating that if the positioning of these standalone operations (hopefully to continue to carry the HP brand name) were not improved that the company would look to keep this $40 billion business going forward. We find it interesting that the company used the term spin-off versus an outright sale.

Meg Whitman’s primary job as HP Co.’s new CEO will be to restore a sense of direction as its bee lost after a decade of leadership lapses and disjointed deal-making.

With 320,000 employees, more than $125 billion in annual revenue and a broad swath of businesses, the company needs a leader who can quickly decide on a clear path and convey that to customers and shareholders.

The company’s stock hit a 6-year low Friday, a day after Whitman got the job following HP’s firing of Leo Apotheker. HP has lost $60 billion in market value since Apotheker’s predecessor, Mark Hurd, resigned amid a sexual harassment scandal last year.

HP used to have its size on it side but in the current market, that’s no longer the power required to secure a foothold and one of the biggest challenges for Whitman will be to figure out how big HP needs to be and it seems that so far, nobody has gotten it right, which makes the top job at HP one of the hardest CEO slots to fill.

Whitman’s most pressing concern is what to do with the world’s biggest personal computer business, which supplies a third of HP’s revenue but is its least profitable division. Many analysts now speculate that HP has no choice but to keep the business and work on repairing strained relationships with customers. Whitman says a decision, on whether to keep it or possibly spin it off, should come by the end of the year.

“For a company this size, there are so many different businesses, you need a good leader, someone that people respect, and this board is not going to push around Meg Whitman,” said Brian White, an analyst with Ticonderoga Securities. “I think it’s a good choice. It doesn’t mean she’ll succeed. She has her work cut out for her. But the odds are she’ll have more success than Leo.”

According to some analysts, there is hope. The stock decline carries a spark of hope, It may have fallen so far that it’s due for a rebound, all fires start with one spark.

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