HP shareholders better be patient, alright

Turnaround may be a long way (and another change in leadership) off

Despite have to explain a 91% drop in quarterly profit, Meg Whitman’s first earnings call since becoming chief executive of Hewlett-Packard was an easy one.

That’s because she wasn’t in the position of having to defend her record. Former CEO Leo Apotheker, who was fired in late September after unveiling a major strategic change that shook the confidence of Wall Street, was at the helm through most of the company’s fiscal fourth quarter.

So Whitman’s role during her first few weeks as CEO has been that of caretaker and damage un-doer. She fulfilled the requirements of the caretaker role by not being Leo Apotheker. The requirements of the latter role are more challenging, but Whitman made a good start by announcing in late October that the world’s largest PC maker would not seek to spin off its low-margin PC unit, as Apotheker had proclaimed in August.

While Whitman knows her honeymoon with analysts and investors (such as it’s been) won’t last forever, she’s trying to buy more time by lowering expectations and counseling patience, both of which are perfectly reasonable and defensible.

But, honestly, what else can she say? Yet, as the Wall Street Journal reports, “some analysts were heartened by what they saw as an appeal for a fresh start.”

I’m sure some analysts were “heartened” by Carol Bartz’s quarterly pleas for investor patience with Yahoo. But after nearly three years of declining revenue, Yahoo’s board of directors decided that perpetual pleas for patience don’t help share price when they’re coming from someone who clearly shouldn’t be running the company.

And I still believe that’s the sobering truth that HP shareholders eventually must face. Reassuring talk is all well and good, but at some point you have to execute and produce results. Whitman is a long way from doing that at HP. Her early success at online auction site eBay made Whitman’s reputation as a tech leader, but growing a consumer-oriented auction site with a huge market advantage during the crazy early days of the Internet is a lot different than turning around a mature technology company that targets enterprises.

The truth is that Whitman, who joined the HP board in January, was a panic choice by fellow directors who realized they had to dump the unvetted Apotheker in a hurry or risk further serious damage to shareholder value. Late last year, after being chosen to replace scandal-plagued former CEO Mark Hurd, Apotheker -– like Whitman today -- was greeted by many as a calming, stable presence. Look how that turned out.

Of course, the real problem at HP is the board of directors. So even if Whitman is up to the task, the company ultimately is still being “directed” by a Royal Court of Dysfunctionality that has churned through four CEOs since 2005. And there’s no sign of that ending any time soon.

So, yeah, let’s hope HP shareholders have a lot of patience. They’re going to need it.

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