UNITED STATES SECURITIES and EXCHANGE COMMISSION Washington, D.C
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2 0 11 Annual Report Meg Whitman President and CEO Dear stockholders First, let me say how confident I am in the future of Hewlett-Packard. We have strong leadership from the consumer markets to the commercial, the industry’s broadest portfolio, unmatched reach and scale, and an exceptionally talented and committed workforce. I look forward to building on this powerful foundation to maximize the value of HP in the marketplace. 1 By harnessing the power of both the structured information that The year in review resides in databases and the unstructured information like Throughout fiscal 2011, we experienced a number of changes video, texts, and emails that exists in the real world, we are well and challenges. positioned to define the future of information management. An uncertain macroeconomic environment, especially in the Third, we met our stated outlook for the fourth quarter. As a United States and Europe, resulted in a weak consumer market management team, we are very focused on delivering consistent that persisted throughout the year and a commercial market financial performance and meeting the public goals we set. that started strong but softened as the year progressed. Fourth, we developed a go-forward plan for the webOS software Additionally, we faced a number of natural disasters, including platform. As you may recall, we discontinued our webOS device the tsunami in Japan and flooding in Thailand. At HP, we business in August, but we retained the highly regarded operating joined in the global relief efforts, committing money, technology, system. We subsequently decided to contribute webOS to the open and expertise to help with the recoveries. Our hearts go out to source community. HP plans to continue to be active in the all those affected. At the same time, we are working diligently development and support of webOS. By combining the innovative to manage our supply chain and inventories to mitigate, as webOS platform with the development power of the open source much as possible, any adverse impact to our customers and community, there is the opportunity to significantly improve our businesses. applications and web services for the next generation of devices. We also acquired the software company Autonomy to help position HP as a leader in the future of information management. What is HP? However, amid a number of strategic announcements and Over the past few months as I met with customers, partners, changes, we did not clearly articulate our direction. Our execution and employees, one question kept being asked. What is HP? during the year proved inconsistent, and we had to manage Our answer: through a CEO transition. HP is the world’s largest provider of information technology All of these issues led to a mixed financial performance. While infrastructure, software, services, and solutions to individuals and this was certainly not HP’s best year, our businesses remain strong organizations of all sizes. That’s what we are and we are proud and we generated solid cash flow. of it. It’s straightforward and clear. In fiscal 2011, HP delivered: At the core of HP are our infrastructure products. Representing • Net revenue of $127.2 billion, up 1 percent year-over-year about 70 percent of our revenues, this is an area where HP excels. We are the market leader in PCs, industry-standard servers, and • Cash flow from operations of $12.6 billion, up 6 percent imaging and printing, and we are well positioned across key year-over-year enterprise infrastructure segments. Everything else we do either • GAAP diluted earnings per share of $3.32, down 10 percent amplifies or builds on this massive differentiating strength. year-over-year On top of our infrastructure products, we layer software. Our • Non-GAAP diluted earnings per share of $4.88, up 7 percent software allows us to manage and secure technology environments year-over-year* consisting of our infrastructure as well as others’—something customers really need. Our Autonomy acquisition also enables us to solve a host of new customer problems, which will provide Early priorities new growth opportunities for HP and our customers. Software at My initial focus as CEO has been to get HP out of the headlines HP is about solving customer problems. and back to being the reliable, trusted company that you can count on. That meant we needed to make a set of decisions to Services wrap our core infrastructure and software businesses, remove any uncertainty surrounding our businesses. and help customers get the most value from HP. Many of our services customers have relationships with HP that have lasted for First, we made a decision about the future of our PC business, the decades. Services position HP to do what we do best: act as Personal Systems Group. After announcing that we would assess a strategic partner to customers by leveraging our full portfolio a possible separation of the business in August, we conducted a and making sure that HP technology is meeting their needs. thorough, fact-based analysis that clearly indicated that PSG should remain a part of HP. We can say with certainty this is the Finally, our solutions make it all work by combining our right answer for customers and stockholders. PSG and HP are technologies to advance customers’ organizational objectives truly better together. in a holistic and compelling way. Second, we closed the acquisition of Autonomy, a market leader We have packaged our enterprise portfolio into in managing unstructured data. We positioned Autonomy for five solutions sets: success within HP by creating a new Information Management • Converged Infrastructure transforms aging, rigid technology business unit that brings together Autonomy, Vertica (another environments into agile infrastructures that can easily scale up fiscal 2011 acquisition), and our existing information management or down to meet changing demands. business. This focused organization will accelerate our momentum in this market and bring new capabilities to our customers. 22 • Application Transformation takes applications that were designed I’ve already discussed the importance of restoring our credibility and implemented for an old model of technology and with all of you, and my No. 1 priority is to strengthen our modernizes them to meet the needs of today and tomorrow. operational discipline and execute consistently, quarter after quarter. Additionally, we are going to focus on the customer. • Enterprise Security protects people and businesses by keeping We are fixing our sales tools to make it easier for customers to sensitive information safe from malicious threats. do business with us and help our salespeople respond faster • Information Optimization harnesses the power of information to their needs. We’re going to double down on quality and in all its forms to drive better insight, foresight, and decision service delivery, ensuring customers have a great experience making, as well as better workflow management. from the first time we sit down with them until their solution is up, running, and delivering value. We want to build a better • Hybrid Delivery delivers our solutions in the way that’s best for online customer experience for both enterprise customers and the customer, be that on-premise, traditional data centers, consumers. We also are investing in our people to attract, private cloud, public cloud, or a combination that optimizes retain, and develop the best talent in the industry. We need the performance and cost. right people in the right jobs at the right time to meet customer This is who we are. Each piece of the portfolio helps customers needs and deliver results. Finally and importantly, we are going turn challenges into opportunities, and we bring the pieces to invest in the innovation that you expect from HP. We together to deliver increased customer value. increased our R&D spend last year and plan to do so again in fiscal 2012. We want to deliver products and services that delight and inspire. Thoughts so far In closing, let me just say that I am optimistic and confident about We have incredible people who are smart, committed to our HP’s potential. We have work to do, but HP has some of the customers, and passionate about our company. HP has a best core franchises in technology. We have a solid earnings and terrific portfolio—I believe that it is the best in the industry. We cash flow base. We have customers who want to do more have market leadership and what we do really matters to our business with us. We have a world-class senior leadership team customers. Enterprise customers rely on HP to run the heart of and employees who want to win. their organizations, and consumers trust us to help manage and deliver the personal information that they depend on. I look forward to updating all of you on our progress and our performance as the year continues. What we do day in and day out is at the center of our economy and our society. HP helps ensure credit card transactions Sincerely, get processed, cell phone calls get connected, mortgages get underwritten, and medical care gets delivered. And just as we help make sure British pensioners get paid on time, we have a thousand stories about the difference we make in the world. It is a great responsibility that we take very seriously. We have a lot of pride in what we accomplish with our customers, Meg and we look forward to making a difference for them in even more ways. The road ahead While I’d like to say that we’re through the tough times, many of the fiscal 2011 headwinds are still with us as we enter fiscal 2012, and our near-term focus is on stabilizing the business.