Back to top

Image: Bigstock

Hewlett Packard (HPE) CEO Whitman to Step Down, Shares Drop

Read MoreHide Full Article

In a sudden move, Meg Whitman has decided to step down as the Chief Executive Officer (CEO) of Hewlett Packard Enterprise Company (HPE - Free Report) , leaving the company in the middle of its restructuring phase to cut costs and focus on high-margin businesses. The move led to deep unrest among investors, causing shares to plunge around 7% on Nov 22.

Coming to the price performance, the stock has lost 3.1% in the past year, wider than the industry’s decline of 2%.

Whitman has been replaced by Antonio Neri who also serves as the current president of HPE.  Whitman will continue to function as a member of Board of Directors in HPE. Antonio will function as the CEO of HPE effective from Feb 1, 2018. Whitman, who will sign off as the CEO stated, "Antonio's ready, the company's ready, and it's the right time."

She further added, "Neri has been with the company since 1995, working his way up to the company's top ranks.”

Whitman has served the company since 2011 and successfully witnessed the company’s split into two. In fact, under Whitman’s leadership, HPE has achieved a major milestone in becoming a stronger, more focused company, which can compete and win in today’s market.

Under Whitman’s leadership, the company restored its balance sheet, strengthened operations and enhanced customer satisfaction.  Post separation from HP Inc. (HPQ - Free Report) , the company also made innovative moves to focus and strengthen portfolio. Moreover, Whitman orchestrated the spin off and mergers of HPE’s Enterprise Services and Software businesses, as well as strategic acquisitions including Aruba, SGI, SimpliVity and Nimble Storage.

HPE’s Trouble

Recently, the company reported not-so encouraging fourth-quarter fiscal 2017 results, wherein the bottom line surpassed the Zacks Consensus Estimate by a penny while the top line missed the same. Moreover, the view provided by the company was also not worth an applause.

HPE expects non-GAAP earnings per share in the range of 20-24 cents (mid-point: 22 cents), which was lower than the Zacks Consensus Estimate of 27 cents.

The company also provided outlook for fiscal 2018. HPE expects non-GAAP earnings per share for fiscal 2018 in the range of $1.15-$1.25 (mid-point $1.2). The Zacks Consensus Estimate was pegged at $1.17.

We remain slightly cautious about the company’s near-term prospects due to the three main challenges it is currently facing — heightened pressure from unfavorable currency exchange movements, elevated commodities pricing and some near-term execution issues. These headwinds are expected to thwart its overall performance in the near term.

Further, macroeconomic challenges and tepid IT spending remain other concerns. Competition from International Business Machines (IBM - Free Report) and Oracle (ORCL - Free Report) adds to its woes.

Moving Forward

Neri, in his new role, will continue to focus on strategic initiatives, key customer relationships and technology development. In our opinion, if any one that could succeed Whtiman, the name is Antonio. Neri’s appointment is a sound choice, given his profound experience in the company over the years. We expect the new CEO of HPE to better understand the overall strengths and weaknesses of the business as he has in-depth knowledge of the market dynamics.

Currently, HPE carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Published in