HP Provides Update on Turnaround Progress, Provides Fiscal 2014 Outlook
Estimates non-GAAP diluted EPS for fiscal 2014 of $3.55 to $3.75 and GAAP diluted EPS for fiscal 2014 of $2.85 to $3.05
Models free cash flow of $6 billion to $6.5 billion in fiscal 2014
Expects to return at least 50% of fiscal 2014 free cash flow to shareholders through dividends and share repurchases
SAN JOSE, Calif. - Today at HP's 2013 Securities Analyst Meeting, the company's leadership team provided an update on HP's progress executing against its turnaround plan and future strategy.
HP's president and chief executive officer Meg Whitman reviewed the accomplishments of the past year-a fix and rebuild year-noting that the multi-year turnaround remains broadly on track. In particular, the company:
Has met or exceeded quarterly non-GAAP diluted earnings per share (EPS) outlook since the turnaround plan began through Q3 of fiscal 2013.
Provided outlook in August that HP expects free cash flow to approach $8 billion by the end of FY13.
Reduced operating company net debt by almost $8 billion over the past 12 months, approaching a goal of zero.
Recommitted to smarter innovation, with research and development (R&D) spending expected to be in excess of $3 billion in fiscal 2013.
While there is a lot more work to be done, I am confident about the progress we are making, said Whitman. We're producing tangible results, strengthening our balance sheet and delivering innovative products across all our key segments. We are implementing the changes needed to support our multi-year turnaround journey, reaffirm HP's leadership position, and create enduring value for customers as well as for our shareholders
The core of HP's strategy is focused on providing unique technology solutions for the New Style of IT. HP has the combination of hardware, software, scale and innovation to provide the integrated solutions that help customers realize the full benefits of cloud, security, big data and mobility.
While the company faces a challenging macro environment, shifting market forces and a rapidly changing competitive landscape, Whitman emphasized that the company has the right leadership team in place to advance its strategy, drive innovation across the business and improve its go-to-market execution. Whitman reiterated that she expects HP's revenues to grow in line with gross domestic product (GDP) over the long term.
2014 outlook
Cathie Lesjak, HP's executive vice president and chief financial officer, provided a financial outlook for fiscal 2014. With pockets of growth helping to offset continuing challenges in the macro environment and weak public sector spending, HP expects the year-over-year revenue decline in fiscal 2014 will moderate from fiscal 2013.
HP anticipates operating profit dollars to be flat to up year-over-year in fiscal 2014, due to its continued focus on cost savings and operational efficiency. The company estimates non-GAAP diluted EPS for fiscal 2014 to be in the range of $3.55 to $3.75. HP estimates GAAP diluted EPS to be in the range of $2.85 to $3.05 for fiscal 2014. Fiscal 2014 non-GAAP diluted EPS estimates exclude after-tax costs related primarily to the amortization of purchased intangible assets and a restructuring charge of approximately $0.8 billion.
HP expects to generate approximately $9 billion to $9.5 billion in cash flow from operations in fiscal 2014. After deducting estimated fiscal 2014 capital expenditures, the company anticipates free cash flow of $6 billion to $6.5 billion in fiscal 2014.
Lesjak articulated the company's long-term commitment to financial discipline and a returns-based capital allocation strategy. In fiscal 2014, the company is expecting to return at least 50% of free cash flow to shareholders through dividends and share repurchases.
In addition, HP will invest in its product portfolio to accelerate high-growth areas in the New Style of IT. HP plans to reinvest approximately $0.12 per share of savings from its restructuring program into the business in fiscal 2014, including products and solutions such as 3PAR, networking, Vertica and cloud solutions.
A copy of Lesjak's presentation materials accompanies this release.
Business segment strategies
Over the course of the day, HP's management team also laid out updated strategies for the company's business segments, including:
Printing and Personal Systems
Dion Weisler, executive vice president of the Printing and Personal Systems (PPS) business, and Steve Nigro, senior vice president of the Inkjet and Web Solutions Business, part of the Printing business, gave an update on PPS. Personal Systems continues to see traction in commercial, where it outgrew the market in the most recent calendar quarter over the same period last year. Printing continues to build on its long-standing market leadership across both ink and laser and introduced a number of new breakthrough products in both categories during fiscal 2013.
In fiscal 2014, PPS will focus on continuing to deliver on its leadership in traditional markets as well as driving product innovation and developing print solutions that address the New Style of IT. PPS' priorities include profitable growth through greater segmentation, continued product innovation and using its leadership position in commercial to address opportunities in mobility, cloud and security.
Enterprise Group
Bill Veghte, executive vice president and general manager of HP's Enterprise Group (EG), discussed the company's opportunities in the $221 billion enterprise infrastructure market. As enterprise customers move to a New Style of IT, requiring more compute, more storage and more bandwidth, they will need solutions built on modern architectures and innovations designed for the future.
Veghte acknowledged executional
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HP Provides Update on Turnaround Progress, Provides Fiscal 2014 Outlook
