Hewlett Packard Enterprise Co. said Chief Executive Officer Meg Whitman is stepping down after six years leading the company.
Whitman, one of the most high-profile women in the technology industry, will remain on the board, Hewlett Packard Enterprise said Tuesday in a statement. She will be succeeded Feb. 1 by President Antonio Neri.
Whitman, 61, took over Hewlett-Packard Co. after it suffered a series of missed targets amid rising competition under her predecessor, Leo Apotheker. She set about slashing jobs and dramatically resetting investors’ expectations for how well the company could perform at a time when customers were adopting cloud computing services HP was ill-equipped to provide. After initially opposing efforts to break up the company, a Silicon Valley institution once known for its innovation, she eventually agreed to split Hewlett Packard’s PC and printing units from higher-margin businesses aimed at corporate computing.
The CEO position is a different job now than what it was when Whitman first took over, and will focus more on the operational aspects of the company, said David Heger, an analyst at Edward Jones & Co.
“They’re at a point now where they need a different skill set than what she offered,” he said. “They’re finished with doing spinoffs and re-engineering, and now what they have left is what they’re going to focus on going forward.”
HPE Post-Split
After separating from HP Inc., the PC unit, in 2015, Whitman spun off and merged HPE’s enterprise services and software business and made acquisitions including Aruba Networks, Silicon Graphics International, SimpliVity and Nimble Storage.
During her tenure, Whitman oversaw almost $18 billion in share repurchases and dividends and delivered a total shareholder return of 89 percent, HPE said. She also cut more than 80,000 jobs before and immediately following the split.
Since the two companies began trading separately on Oct. 19, 2015, HPE stock has gained 47%. The shares fell 6.2% to $13.25 in extended trading on Tuesday. They had been little changed in regular New York trading before the announcement.
“Meg has worked tirelessly to bring stability, strength and resiliency back to an iconic company,” HPE chairman Pat Russo said in the statement. Neri “is the right person to deliver on the vision the company has laid out.”
Neri’s promotion wasn’t entirely a surprise. A longtime HP executive, Neri, 50, was promoted to the role of president in June, raising speculation about Whitman’s succession plan. In his more than two decades at the company, starting as a customer-service engineer in a call center, Neri climbed to one of the top leadership positions at the Enterprise Group. That division is HPE’s largest business segment, including servers, storage products, networking and services. In that role, Neri oversaw research and development, new product introductions and marketing strategy.
Earnings Disappoint
The leadership shuffle came as HPE gave a forecast for earnings in the fiscal first quarter that missed analysts’ estimates; revenue in the fourth quarter also fell short of projections. In the current period, adjusted profit will be 20 to 24 cents a share, compared with an average prediction of 27 cents. In the quarter that ended Oct. 31, sales of $7.66 billion missed the $7.77 billion average estimate.
The Palo Alto, Calif.-based company said its server business will see some declines next year, and the pricing environment isn’t expected to improve. HPE’s 2018 operating margin will be about 11% to 12%, CFO Tim Stonesifer said on a conference call. Margins in the first quarter may be pressured, but will improve throughout the year, he said.
On the call, analyst Toni Sacconaghi of Sanford C Bernstein & Co. said he was “surprised” at the CEO change, which felt "abrupt."
“There’s still a long ways to go in terms of improvement in the server business, and margins were down,” Sacconaghi said on the call. “So it’s not entirely obvious to an outsider that HP is at some ready point for a change.”
Whitman, who has recently said the company has a lot more work to do, said there’s been no change in that sentiment, but that appointing Neri as CEO is "the right thing."
“We’ve got a very good leadership bench. We’ve got strategy that’s crystal clear and focused,” she said. “The next CEO of the company needs to be a deeper technologist, and that’s exactly what Antonio is.”
Whitman’s Peers
Whitman was the second-highest-paid American female executive, after IBM’s Ginny Rometty, with compensation of $52.3 million, according to the Bloomberg Pay Index. Since 2009, 19 female CEOs of Standard & Poor’s 500 companies have stepped down. In only three of those cases was she replaced by another woman, according to data compiled by Bloomberg.
Her departure brings the number of female CEOs in charge of S&P 500 companies to 25, or 5%.
HPE didn’t specify what’s next for Whitman, who previously helmed online retailer EBay Inc. She ran unsuccessfully as a Republican for California governor in 2010 before taking over Hewlett-Packard, and was an early front-runner this year for the job of CEO at Uber Technologies Inc., which eventually went to former Expedia Inc. executive Dara Khosrowshahi.
Whitman did note that she doesn’t intend to re-emerge at one of HPE’s rivals.
“There is no chance I’m going to a competitor -- no chance,” Whitman said on the call. “I love this company and I would never go to a competitor.”
By Gerrit De Vynck and Natalie Wong
