HP at Citi Conference Notes

Cathie Lesjak – CFO

Japanese competitors have benefited from weak yen but that is normalizing

“So, when it comes to Japanese competitors, one of the advantages that they have had and this isn’t an alternatives question, this is kind of the core business. The Japanese have had a fairly weak yen if you look at oh the last couple of years that has enabled them to be very price aggressive on a unit prices perspective. What we’re seeing is that that hasn’t stepped up significantly despite the fact that the yen has weakened a bit. And so it seems that it kind of normalizing.”

Buying market share can be bad economics

“As the CFO, I get quite nervous about having a goal of market share, because you could go out and buy a lot of bad units. And you could high-five on the market share. So, it’s important that it’s profitable and then it’s then consistent with our strategy.”

Price increases as commodity prices increase

“So, as we talked about earlier, using our balance sheet is one of the levers that we use. That is not related to price increases directly. The second lever that’s available to us to deal with commodity cost increases, is increasing prices. And we’ve done several price increases.”

Customers may expect price decreases now that the dollar has come down

“we keep talking about the fact that commodity costs are increasing, which they are and as well the fact that until recently the currency has been a bit of a challenge as well. So, when you sit and talk to the customer and you help them understand why you’re increasing prices, you have heightened their awareness as to what drives price increases. So, we expect that with the weakening dollar, we will have to drop prices much more rapidly than we had in the past. The customers are going to basically say, I stuck with you when you were raising prices, because I understood why you needed to do it. Now, there is an opportunity for you to lower prices, we expect to lower price. And so we do expect the prices will come down if the dollar stays kind of at the levels that we’re seeing or weakens further.”

Have the opportunity to disrupt manufacturing with 3D printing

“We have the opportunity to disrupt a $12 trillion manufacturing industry. We are playing today in plastics, 3D-printed plastics, which is the biggest market for 3D at this point in time. You are seeing huge companies, just look at this opportunity and realize that it’s going to make a difference to their manufacturing.”

HP (HPQ) Q3 2016 Results

Dion Weisler – President and Chief Executive Officer

From market share to maximizing profits

“We were more challenged in our business ink products where we drove pricing discipline and lost some share. While our Japanese competitors are talking about shifting their focus from share to profits due to the strength of the yen, it is not broadly evident yet that this is showing up in less aggressive pricing.”

Managing the supplies business

“…we made a strategic decision to evolve how we run and manage our supplies business in recognition of the changing market dynamics, giving global price transparency. To harmonize pricing, we determined an increase in marketing, combined with a reduction in channel inventory levels, was necessary. And we took the first step in the third quarter. With continued support from our channel partners, the execution is on track.”

Some shortages in supplies expected in adjacent segments to the PC industry

“With regards to shortages in supplies, I don’t believe, in Q3, we saw any material shortages that we had to with. However, as you know, these are long supply chains and we are seeing on the horizon some shortages, particularly around LCDs, DRAM and Flash memory. And it’s not so much coming from the PC industry. It’s more coming from adjacent categories going to – glass going into televisions, memory going into phones that are likely to double density, which is putting pressure on the overall industry.”

Cathie Lesjak – Chief Financial Officer

Too early to tell on the Brexit effect

“For Q3, we saw very, very limited impact from Brexit. And this is largely as a result of the fact that we were largely hedged by the time the Brexit vote actually happened. And so, Q3 was really a non-event. On a go-forward basis, it’s unclear exactly what the impact is going to be. We are definitely seeing and, in some cases, following with our own pricing increases. What’s less clear is not so much what the currency impact is and how we adjust to the currency impact, whether it’s through hedges or through price increases, it’s really what is going to be the impact on demand, what is GDP going to actually do, both in the UK and then, frankly, if it spreads broader to EMEA. And it’s just too early to tell.”

Inventories down, marketing investments up

“…supplies channel inventories is down over the course of the half by $450 million and we were also going to increase our marketing investments.

Miscellaneous Earnings Call Notes 2.26.16

Dean Foods FY 1Q16 Earnings Call

Gregg Tanner

Global milk production continues to increase

“We expect global dairy fundamentals to continue to be overall supportive to our business as production growth continues to outpace demand. Year-over-year, total milk production from the top seven exporters continues to increase, albeit at a much slower pace compared to the initial robust expansion experienced in 2014.”

Export volumes continue to decline

“I think the other thing that wasn’t in our prepared remarks is that we’re seeing export volumes continue to decline, so it’s leaving more milk in the U.S., which I think will help us longer term to kind of keep the prices more manageable as well.”

Greenlight Capital Re’s (GLRE) David Einhorn on Q4 2015

Entered 2016 with lowest short exposure ever

We entered 2016 with 16% net exposure, the lowest we’ve entered any year. The Greenlight Re investment portfolio returned 1.2% in January while the S&P 500 fell about 5%. Our shorts have been helpful and returned 7% in January. We started to see some reversion in the market in January and February as the markets have sold off we become a little more net long as our shorts have fallen in value and we found a few things to buy.”

Consumer could come to the rescue

“On the bright side, the U.S. consumer may come to the rescue as we are nearing full employment, wages are slowly rising and there is an effective tax cut in the form of low energy prices. It remains to be seen whether the U.S. consumer will provide support for corporate earnings and if not at least we hope they buy iPhones, GM cars, and Michael Kors bags particularly at Macy’s.”

Heidrick & Struggles International’s (HSII) CEO Tracy Wolstencroft on Q4 2015 Results

Everyone is focused on the volatility but no one is frozen by it

“We are all like you looking at the opening of 2016 and seeing the volatility, whether it would be how it emanates from Asia, from the energy markets, consequent knock-down effects in financial services, etcetera. We find in our client dialogue that while everyone is focused on it, no one is frozen by it. That may – does that that evolve? We will see. But I would say that every – certainly myself in meetings with clients as well as in meetings with our consultants, we are trying to get a barometer on what you are asking every single day. And it would be very difficult for us to give a broader trend line to what I just described.”

Rich Pehlke

Certainly seeing volatility in economic conditions affect client decisions

“We certainly are seeing the current volatility in the economic conditions factoring the client decisions about what they are doing and what they are thinking about the growth of their business and how they are going to deploy capital. The good news is as we have said many times is that talent is the hot agenda item for most leaderships and boards today. But at the same time, capital deployment certainly has an impact on driving our business. Where we have probably seen the most is as is consistent with what you have read in the news, where we probably see the biggest volatility right now is in the APAC region, simply because of the impact of China and what you see going on there in terms of people thinking about the region itself. And then certainly from a sector standpoint, we have seen more discussions and commentary in areas like financial services, which really are driven by large financial institutions from larger banks and obviously they moved and certainly have an influence on some of that. ”

Edison International (EIX) Theodore F. Craver, Jr. on Q4 2015 Results

SCE is a “wires focused business”

“We have positioned SCE as a wires-focused business, consistent with our views on industry transformation and in alignment with California’s public policy objectives to move the state to a low carbon economy.’

Bank of Montreal (BMO) William A. Downe on Q1 2016 Results

Surjit Rajpal – Chief Risk Officer, BMO Financial Group

Delinquency tick ups because the quarter ended on a Sunday?

“The question that you asked relates to the fact that this quarter again was on a weekend. And the difference between this quarter and the last quarter was that this quarter was on a Sunday, as opposed to ending on a Saturday, which really means that two days of payments that you would normally receive had to be deferred to the Monday following. And that explains the difference, because right after the weekend, the delinquency rate did go back to normal levels. So, I wouldn’t read too much into the early-stage delinquencies that you see in the chart there.”

90 day delinquencies have increased in Alberta

“So, when I look at the 90 days, you did notice that there was a quarterly increase of 14 basis points year-over-year, and that is telling in some ways. And we looked at Alberta in that respect as well, because your question if it’s more related to what’s going on in Alberta. In Alberta, year-over-year, there has been an increase of 34 basis points, which is actually much more telling. ”

Stifel Financial (SF) Ronald J. Kruszewski on Q4 2015 Results

IPOs were down 65% in 2015

“The number of priced U.S. IPOs in the fourth quarter of 2015 decreased to 32 from 68 during the same time period. That’s really down 53%. For the full year of 2015, the overall U.S. IPO market was down in terms of both number of transactions, which were down 41%, and dollars raised, down 65%. Certainly a difficult year in the IPO market and not starting off particularly strong this year.”

The reality versus the market’s perception are completely different

“The reality sometimes of what’s going on versus the market’s perception are completely different. This is one of those times.”

Target (TGT) Q4 2015 Results John J. Mulligan – Chief Operating Officer

Customers trust that you’re in stock

“What I think is much more important, when you talk about essential categories, ultimately this is about the guests trusting that you will have the merchandise they want when they come in our stores. If a new mom takes her baby out in 10-degree weather for diapers and formula, you better have diapers and formula in your store.”

HP (HPQ) Dion J. Weisler on Q1 2016 Results

Haven’t seen stimulation of demand from Windows 10

“I would say that Windows 10, whilst I still believe it’s a tremendous operating system platform and universal apps and continuing computing make devices like the Elite x3 a reality, we have not yet seen the anticipated Windows 10 stimulation of demand that we would have hoped for, and we’re carefully monitoring any sort of price developments that could further weaken demand. ”

Campbell Soup (CPB) Denise M. Morrison on Q2 2016 Results

Weather had some impact

“Finally, weather is not something we control and it’s certainly not the main reason for the decline in our soup business, but we believe the unusually warm winter had a negative impact on the entire category in the first half. ”

HP FY 4Q15 Earnings Call Notes

HP’s (HPQ) CEO Meg Whitman on Q4 2015 Results

HP completed its separation

“On November 1st we completed the historic separation and became two separate independent public companies, HP, Inc. and Hewlett-Packard Enterprise. I couldn’t be prouder of how we executed on the incredibly complex separation.”

We are sunsetting our public cloud offering

“we announced in October that we will double down on our private and managed cloud capabilities and sunset our public cloud offering. This is the right move. It plays to our strength in private and managed cloud. We will continue to extend our cloud infrastructure leadership and integrate the public cloud element for our customers through a strategic partner-based model.”

Microsoft Azure will become our preferred public cloud partner

“Going forward, Microsoft Azure will become a preferred public cloud partner. HPE will serve as a preferred provider of Microsoft infrastructure and services for its hybrid cloud offerings. Overall, the move to a hybrid cloud environment present a significant growth opportunity for us and you can expect to hear more about our approach in coming months.”

PC Market was tough especially in consumer

“The PC market continued to be tough, especially in consumer where industry channel inventory remained elevated in the market. While we saw improved performance in the U.S., EMEA remained weak with market units declining 22% year-over-year in the third calendar quarter”

Expect PC to remain challenged for more quarters to come. Windows 10 has not been a catalyst for sales

“Looking ahead, we expect the PC market to remain challenged for more quarters to come. As expected, Windows 10 has not been a material catalyst for sales yet, but continues to receive favorable reviews.”

Every customer is looking to solve 4 IT problems

“these four for transformation areas is exactly what virtually every customers looking for. How do I transform my IT environment to a hybrid environment? How do I secure my digital enterprise? How do I enable analytics, big data analytics environment? And how do I drive workplace productivity. And we are aligning software service and hardware or infrastructure to that.”

Hewlett Packard 3Q15 Earnings Call Notes

Two months until separation

“With only two months left until our separation, I’m pleased with the progress we’ve made along many fronts.”

Revenues hit harder as hedges roll off

“Revenue of $25.3 billion was down 8% year over year or 2% in constant currency, with declines in all regions and particular weakness in EMEA. The six point gap between as-reported and constant currency revenue performance is wider than prior quarters, as the financial hedges are rolling off.”

Outlook includes inventory destocking, currency headwinds, competitive pricing environment and softness in PCs

“the outlook definitely reflects the change in inventory levels. We are going to bring channel inventory levels back down. It reflects the currency headwinds that we’re getting both because of hedges that are coming off and just the currency headwind, the indirect currency headwind of a very competitive pricing environment in IPG as our Japanese competitors take the weak yen against both the euro and the dollar and really price aggressively. And then it also takes into consideration the softness that we’re seeing in the PC market.”

Finally rounding the corner where growing businesses are larger than the declining businesses

“I think you’ve all heard us talk about that we have businesses where the declining businesses have been bigger than the growing businesses. We’re now rounding the corner where the growing businesses are bigger than the declining businesses, which is actually going to lead to growth. And boy, that has taken a while to get here, but we’re here. And I think that sets Hewlett-Packard Enterprise up pretty well as we think about growth going forward’

Windows 10 was a challenging transition because it was a free upgrade and short transition time. It led to excess windows 8 inventory in the channel.

“We did anticipate a challenging operating system transition to Windows 10 on two dimensions. One was a free upgrade that was of course offered. And the second was the very short transition time, which is normally about three months, which was compressed to under one month. And what that drove was fairly high Windows 8 channel inventory levels, and that will take a little bit of time to flush.

Good news is that Windows 10 has strong feedback. Commercial was tough compares.

“I guess the good news is that the Windows 10 feedback is pretty good, and a great operating system is important for the ecosystem in the industry. So once Windows 8 flushes, which may take a little time here in the industry, we should see some stimulation from Windows 10. Commercial, of course, is a little simpler to understand. The compares are tough. This was the peak last year of the Windows XP transition. But that drives higher profitable units for us and we are clearly focused on that.”

This was an interesting moment, reads a little like VP of personal systems is giving a stiff arm to Whitman?

“Margaret C. Whitman – Chairman, President & Chief Executive Officer
Let me clarify that it’s not our Windows 8 inventory that has to flush through. We’re running nice inventories on Windows 8.

Dion Weisler – Executive VP-Printing & Personal Systems
Look, I think in general that’s an industry statement. If you were to look across, by all reports Windows 8 channel inventory levels are higher, and they’re on the higher side for us as well. But we are as an industry looking at having to flush through Windows 8 before Windows 10 really takes hold.”

Outlook for PC business: down high single digits, notebooks stronger than desktop

“Broadly speaking, our view is not dissimilar to the industry analysts. We think it will be challenging for the next several quarters. We’re generally aligned with the industry on that. We see it being down high single digits versus only negative to last year, driven by the XP refresh. We see notebooks being stronger than desktops. We see opportunity in commercial mobility, in accessories, in services.”

PC market is similar to 2013

“And the market to me at the moment reminds me a little bit of the market in 2013. And it really requires a highly disciplined approach to market segmentation, cost optimization, leveraging the 160,000 channel partners that we have around the globe that do an amazing job of adding value to our customer set and continuing to drive our innovation agenda. We remain disciplined about not chasing share for share’s sake, playing where we choose to play and winning in those segments. ”

“the next couple of quarters are probably going to be reasonably tough. The next several quarters we think are going to be pretty tough.”

Hewlett Packard FY 2Q15 Earnings Call Notes

Significant market challenges

“we faced significant market challenges due to currency movements, softness in PCs, home printing, and IT outsourcing markets and execution challenges in pockets of the business that require more work.”

Markets are shifting rapidly

“as you will recall last October we announced our plan to separate HP into two independent Fortune 50 companies. Today I’m more convinced than ever that this is the right thing to do. Over the past six months we’ve seen the markets continue to shift and evolve at a rapid pace.”

Enterprise customers need help moving to a hybrid infrastructure

“In Hewlett-Packard Enterprise our customers are demanding services and solutions that will help them manage traditional IT better, while planning their journey to a hybrid infrastructure.”

Lots of things have needed to happen to complete separation

“we’ve made substantial progress across a number of areas that gives me confidence that we’ll complete the separation by the end of our fiscal year. We’ve completed the leadership and organizational structures for each company and largely completed our work force assignments. We’ve made progress in recruiting new board members for each company. We’ve evaluated how we can best meet customer needs and as a result have planned a new, optimized, partner driven go-to-market approach in over 50 global markets. Our real estate teams have made decisions about our sites around the world, and we’ve performed thousands of hours of IT system testing ahead of the separation”

Re-pricing from currency movements did impact demand

” the currency movements and the associated re-pricing impacted demand. We managed to offset the currency impact to company level operating profit in Q2 through hedges and re-pricing.”

PC is weaker, but server stronger

“While the PC market is weaker than we anticipated, we’re actually doing better in some of the businesses, like Industry Standard Servers. So while the cash flow might be slightly lower in PCs, depending on how the market evolves, we’re actually going to more than make that up”

Hewlett Packard 4Q14 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Revenue impacted by currency

“here are couple of factors that had an impact on our first quarter financial results and how we think about the rest of the year, and I want to address these. Let me talk for a moment about the global environment with the particular focus on unfavorable currency movements.”

“Our revenue declined approximately 5% year-over-year as reported, but only 2% in constant currency”

Weaker yen means competitors can be more aggressive with price

“The weaker again helps the cost side of our business, but it also allows our Japanese competitors to price much more aggressively. In addition, printing specifically the laser business is overweight in Russia, which has it had another dimension to currency impacts.”

30c hit to guidance thanks to currency

“With all that in mind, we are updating fiscal 2015 non-GAAP diluted net earnings per share outlook to be $3.53 to $3.73 which is lower by $0.30 due to currency headwinds.”

Long sales cycle business

“As you know this is a long sales cycle business. I think we first engaged with Deutsche Bank over 18 months ago maybe even closer to two years. ‘

PC market outlook

“I think in January we’re pretty aligned with the industry projections of the personal systems market, we’d suggest sort of low single digit growth. We believe that PC units will be in small decline, but there are pockets of growth across the segments, in some segments including mobility, accessories and services. We have seen an expected slowdown in the commercial segment following the XP refresh that fueled high growth last year. However, we’ve seen to counter balance that momentum in the consumer side of the business as consumers refresh their older PCs.”

Bullish on servers

“The combination of Gen9 and the refresh cycle makes us fairly bullish on industry standard servers kind of throughout the rest of 2015”

Hewlett Packard FY 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Net cash position vs. net debt position in 2012

“As a result, our balance sheet now stands at an operating company net cash position of $5.9 billion, a significant improvement from the $11.8 billion of operating company net debt in the first quarter of fiscal 2012.”

Finally breaking up the company

“Last month, we made another significant announcement that I believe will help accelerate the progress we’ve already made in the turnaround. We plan to separate HP into two new market-leading independent publicly traded companies. Hewlett-Packard Enterprise will lead the next-generation technology infrastructure, software and services for the new style of IT.

HP Inc. will be the leading personal systems and printing company, delivering innovations that will empower people to create, interact and inspire like never before. ”

Saw weakness in Japan enterprise

“We saw softness in Japan, which contributed to about half of the regional decline. And as Meg mentioned, had a tough compare in India related to the large PC deal won in the same period last year.”

The US is strengthening in a way that is way different than the last 3 years

” I would say, from a macroeconomic point of view, we don’t expect much change across the globe with the exception of the United States, which does seem to be strengthening in a way that is different from the last three years.”

We have 786 legal entities at HP

“the immediate mandate and I am going to a little bit of detail here is there is a corporate separation management office, who is tasked with creating three years of historic financials for each of the different businesses, which of course we do not have because we’ve been together. Second is a very detailed analysis of tax and legal separation. We have over 786 legal entities that this company, all of which have to be looked at and rationalized.”

Separation is totally the right thing to do

“I will say is this separation was totally the right thing to do for this company. It will as I said make us more customer focus, but it also give us a chance to clean sheet two new Fortune 50 companies.”

Hewlett Packard 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Revenue grew for the first time in 3 years

” For the first time in three years, the company delivered top line revenue growth on a year-over-year basis. Revenue for the company was $27.6 billion, up 1%. As I’ve said many times before, turnarounds are not linear and we face some tough comparisons in the fourth quarter but overall I continue to be very encouraged by the progress we’re making.”

Whitman now going to be dual CEO/chair

” HP’s Board of Directors decided to combine the roles of Chairman and CEO, and I’m honored that they’ve asked me to assume this responsibility. I believe this will help us lead more effectively through the turnaround. Let me reassure everyone that board and I remain fervently committed to the strong practices and financial disciplines we’ve put in place during the past three years. The best interest of our investors are always top of mind with me and the HP board.”

The windows XP expiration is probably over

” The windows XP expiration has contributed to our growth, although we believe we’re now through much of that benefit. However, our product lineup, driven by products like our Elite Book series and our X-360 convertible notebook is the strongest we had in years, and we continue to see customers looking to refresh their aging install base”

Server business doing well–capitalizing on confusion over IBM-Lenovo deal

” In Industry Standard Servers, we saw 9% growth from the prior year period, which represents our fourth consecutive quarter of revenue growth. And we expect to take almost a point of share in the second calendar quarter. We’re seeing good early traction with service providers, as a result of our partnership with Foxconn to produce a line of cloud-optimized servers and we moved aggressively to take advantage of the uncertainty customers feel about the IBM-Lenovo transaction”

Consumer sales up 8% in personal systems

” Personal Systems had an excellent quarter across all businesses, with revenue up 12% year-over-year to $8.6 billion, gaining share across the board. Commercial sales grew 14% year-over-year, with consumer sales up 8% and strength broadly across all of the regions, outside of pockets of weakness in Russia and China.”

PC business is flat to slightly declining

“The PC business is flat to declining slightly and we think that that will continue. However, what we do believe is we can continue to gain share in a relatively flat market and that’s because we got a terrific product lineup”

PC was strong across the board except for China and Russia. China was strong in other areas though

“with regard to PC strength regionally this was broad based across all regions, Americas and EMEA in particular had good quarters. China was a little weaker for us in PCs, Russia was tough for us across the board. But what I will say is China for HP as a whole was actually a pretty good performance. Servers did very well, our Printing business did very well there. Our software business did quite well there. So, China was only a weak spot in the PC area”

US PCs up double digits

“So if you look at PCs, in Americas up in local currency double digits. That was led by very strong performance in the U.S., again double digit performance. EMEA had double digit performance growth as well and that was heavily led by the UK with double digits, Germany, double digits, and to a lesser extent, Italy. And then APJ was up high single digits. So we really had broad based strong performance in PCs.”

Upgrade cycle in windows 2003 servers

“. We think the windows Server 2003 upgrade is an opportunity for us. There’s a significant number of Servers in the install base and they are going to have to upgrade. So there is some similarity between the XP upgrade and the server upgrade but and so we are following the same program from a marketing perspective”

Hewlett Packard 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Continued stabilization in commercial PCs

“Overall, we’re seeing a slowing market contraction and signs of stabilization, particularly in commercial PCs.”

Consumer notebook revenue grew slightly

“Commercial sales grew 12% year-over-year with consumer sales down 2% although consumer notebook revenue grew slightly for the first time since the fiscal 2010 third quarter.”

Cutting workforce to improve efficiency, not because of outlook

“this actually has nothing to do with our confidence in the business. This has to do with really now understanding the opportunities that we have to make this company better. ”

Added benefit of lowering costs, increasing competitiveness

“the longer I am here and this management team is here the more opportunities we see and we think that’s goodness. That’s goodness because it makes us easier for customers to do business with, it makes easier frankly for employees to get things done here. And by the way has an added benefit of making us lower cost so we’re better able to compete in a new world order.”

More opportunities the deeper you get into a turnaround

“I’ve done a number of turnarounds in my carrier, not at the scale I will say, but they are always you see more opportunities the deeper that you get in. And so I am actually quite excited about the opportunities it provides”

Stabilization in EMEA PC market

“by the way there is some strength in [EMEA] flat year-over-year for the first time in seven quarters. So the market is definitely stabilizing.”

PC refresh cycle, and people realizing that tablets can’t do everything

“we also see some momentum in what I would call a long overdue PC refresh and frankly the fact that companies are realizing there is a need for a productivity tool that’s different than just a tablet.”

Have to be more nimble, which is why trimming work force

“we need to run this company more efficiently, not only for the benefit of cost which is good because then we can reinvest and things that will make us stronger but frankly in terms of ease of doing business, ease of working here and faster more nimble decision making. We’re going to have to be quicker and faster and more nimble to compete in this new world order. And by the way having a lower cost structure is an added benefit to that.”