Hewlett-Packard Co shuffled its top ranks on Wednesday, shifting a star executive to a role identifying acquisition targets after a disappointing performance from the division he oversaw curtailed the No. 1 PC maker’s 2014 outlook.<\/p>\n
Shares in HP dropped 8 percent in after-hours trading after the company reported a 9 percent decline in Enterprise Group revenue, the company’s second-largest division and a critical component of CEO Meg Whitman’s plan to transform HP into a provider of enterprise computing services able to take on IBM and Cisco Systems Inc.<\/p>\n
Whitman replaced Dave Donatelli with Bill Veghte at the helm of the Enterprise Group on Wednesday, calling the unit’s performance “very disappointing.” That, plus a persistent decline in PC sales as tablets and smartphones revolutionize computing, led her to backpedal from when she said in May that 2014 revenue growth was still possible.<\/p>\n
“What has changed about 2014’s outlook is a couple of things – Enterprise Group’s performance especially during the quarter,” she told analysts on a conference call. “Weak execution has amplified the market challenges we know exist.”<\/p>\n
“It’s unlikely … that we’ll see the growth in 2014 that I had hoped.”<\/p>\n
The Silicon Valley stalwart, which has been undergoing a radical reshaping under Whitman for the past two years, is grappling with weak IT spending globally. Poor sales and product execution, along with weakening demand for the industry-standard servers that comprise the largest part of its corporate hardware business, is aggravating the situation.<\/p>\n
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 that sells servers, storage and software services to organizations. He will instead seek out early-stage technologies for investment, the company said.<\/p>\n
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.<\/p>\n
Whitman said the computing giant was “back in the market” for strategic acquisitions, which she saw as essential to a continued transformation.<\/p>\n
Veghte takes over immediately as head of the division, and will not be replaced as 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.<\/p>\n
Veghte’s experience stand him in good stead as corporate IT infrastructure moves toward a cloud- and software-based model, versus the traditional structure of large servers on site to store and process data.<\/p>\n
“He’s going to be looking at the segment through a different lens,” said Shebly Seyrafi, an analyst at FBN Securities.<\/p>\n
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.<\/p>\n
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.<\/p>\n
Donatelli’s division accounts for about a quarter of the company’s overall sales.<\/p>\n
In all, the company recorded revenue of $27.2 billion in the fiscal third quarter, down from $29.7 billion a year earlier. That missed the $27.3 billion in sales that Wall Street had expected, on average.<\/p>\n
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.<\/p>\n
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.<\/p>\n
Shares in the company slid to $23.42 in after-hours trade, from a close of $25.38 on the New York Stock Exchange.<\/p>\n
Steepest PC market decline yet for MEA<\/a><\/strong><\/p>\n PC sales in sharp decline<\/a><\/strong><\/p>\n New HP board more \u201cshareholder friendly\u201d: analyst<\/a><\/strong><\/p>\n