Computing giant Hewlett-Packard (HP) reported a dramatic 91% drop in fourth-quarter profits after a turbulent year that included the ousting of its CEO and the shelving of its WebOS hardware efforts to refocus on software and cloud infrastructure.
Where does the world’s largest technology company go from here after a confusing and eventful twelve months?
In what proved to be a disappointing quarter—though not as dire as some had predicted—HP posted earnings of roughly $200 million, down from $2.5 billion in the same quarter a year earlier, despite a modest increase in revenue.
Current CEO Meg Whitman, formerly head of eBay, has moved quickly since replacing Leo Apotheker in September. Apotheker’s brief tenure included a series of profit warnings and controversial strategic proposals that drew vocal shareholder criticism and ultimately led to his removal.
Much of Whitman’s early tenure has focused on reversing or reshaping several of Apotheker’s plans. She halted proposals to spin off or sell HP’s PC business and discontinued WebOS-based smartphone and tablet projects, including the recently launched TouchPad.
“We’re relatively pessimistic about the economic outlook in two of our three major regions. 2012 just looks tough to me,” Whitman told analysts. “We need to get back to the business fundamentals in 2012, including making prudent investments in the business and driving more consistent execution.”
Apotheker had drawn significant controversy in August when HP agreed to acquire UK software firm Autonomy for $10.3 billion, a deal many believed was significantly overvalued.
Whitman has confirmed that the Autonomy acquisition will proceed and indicated she sees the integration as central to HP’s strategy, while also saying the company is unlikely to pursue acquisitions of that magnitude in the near term.
Autonomy and HP were already working closely, with sales leads and integration points flowing between the two organizations. Whitman argued that being part of HP would allow Autonomy to scale more rapidly than it could have on its own.
“That’s the name of the game for 2012. There’s going to be lots of other things we do together, but accelerating the growth of Autonomy, using the distribution capability of Hewlett-Packard, is priority number one, two and three for 2012,” she said.
So what does HP’s strategy look like under Whitman? “HP is getting back to business fundamentals in 2012,” she told analysts. “No more surprises.”
Investors and industry watchers can expect further clarification in December, when Whitman is scheduled to present a comprehensive strategic plan. With leadership settled and a renewed focus on execution, HP’s moves over the next 12 months will be closely scrutinized across the technology sector.