NEW YORK (
) -- Monday night was Meg Whitman's first earnings call since she took over as CEO of
. I have been a vocal critic of her being selected as HP's CEO, but I thought she did a good job.
My past criticisms of Meg to be the next CEO have been:
1. She's done best in a small consumer company and that's very different from a large enterprise company like HP.
2. She got progressively worse as a CEO at
as the company got larger.
3. She made increasingly erratic and over-priced acquisitions at the end of her eBay tenure.
4. She was very piggish in her pay and perks at the end of her eBay tenure -- not a model of good corporate governance.
HP CEO Meg Whitman
The most impressive part of Meg's performance on the earnings call (and in the subsequent press interviews since) is that she's been a very crisp and effective communicator. It stands in such stark contrast from her predecessor Leo Apotheker. She's only been on the job for a couple of months and only on HP's board since earlier this year, but she showed a remarkable adeptness in speaking about the different aspects of the business and the issues facing the company.
It made a positive impression that she could speak so well. In that way, HP's board does look smart for switching horses the way it did earlier this year. But this board doesn't get off so easily. The contrast between her discussing the business and Leo only further mystifies you how this board could have selected Leo in the first place.
There were two things that Meg announced as part of the earnings call that negatively hit the stock on Tuesday: First, they announced that they would no longer give revenue projections by segment or as a whole. Instead, HP will only project earnings. And second, they lowered earnings expectations for 2012.
It's understandable that the market reacted by taking the stock down 4% on this news. However, from Meg's point of view, she's all about lowering expectations for her and her team. Therefore, she'll look all the better if and when she exceeds those lowered expectations down the road.
I don't care so much about lowered earnings expectations, which she blamed on European uncertainty even though other large multinationals have yet to bring down their expectations for Europe on these expectations. However, it is always a bad sign when a company withdraws revenue guidance of any kind. Remember when
Research in Motion
pulled its guidance for the number of devices it would ship every quarter? That was a big predictor of its business deteriorating materially.
HP Investors are justifiably worried that HP management is expecting the revenue to take a big hit in the coming quarters -- but know they can always whack employees in order to hit their earnings projections and claim victory.
The other thing that Meg Whitman has tried to emphasize is that HP would no longer be undertaking any large acquisitions for the next year while they strengthen their balance sheet. She rightly points out that this is a company that still generated $12.6 billion in cash flow in the last year. They can use that to pay down debt, keep the dividend, and keep their powder dry.
Meg spoke in a
interview on Tuesday with David Faber about how HP needed to focus on internal innovation rather than acquisitions in the near term. Longer term, she said that HP would continue to internally innovate and do acquisitions.
It sounded like a rah-rah speech to the HP employees to me. And, while I agree that hitting the pause button on more acquisitions for the near-term would seem to make sense, you can't help but wonder what the board was thinking back in August when they were giving Leo the green-light to buy anything and everything (at any price) he wanted to re-create the company as a software company. Whitman is clearly divorcing herself from the idea that HP is going to become a software company. The status quo is back, baby!
With the dampened expectations, HP's stock looks like it will hover in place for the next couple of quarters while it continues to get itself strategically cleaned up. That serves Meg fine, as she wants to keep her head down and stop the critics from breathing down her neck.
At the time of publication, Jackson did not have a position in any stock mentioned.
Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson