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CNBC Exclusive: CNBC Transcript: CNBC's David Faber speaks with Meg Whitman, Hewlett-Packard CEO, Today on CNBC's "Squawk on the Street"

Thursday, 23 May 2013 | 11:31 AM ET

WHEN: TODAY, THURSDAY, MAY 23RD

WHERE: CNBC'S "SQUAWK ON THE STREET"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Hewlett-Packard CEO Meg Whitman today on CNBC's "Squawk on the Street." Following is a link to the video of the interview on CNBC.com: http://video.cnbc.com/gallery/?play=1&video=3000169888.All references must be sourced to CNBC.

FABER: NOW TO A BRIGHT SPOT AMIDST A LOT OF RED TODAY. HEWLETT-PACKARD SHARES ARE RALLYING AFTER REPORTING EARNINGS AFTER THE BELL, HANDILY BEATING ANALYSTS EXPECTATIONS ON THE BOTTOM LINE. REVENUES WERE SLIGHTLY SHORT OF ESTIMATES WITH EVERY REPORTING SEGMENT EXPERIENCING A DECLINE IN SALES ESPECIALLY THE COMPANY'S PERSONAL SYSTEMS BUSINESS, WHICH PCs IS A BIG PART OF. MEG WHITMAN IS HEWLETT-PACKARD'S CEO AND SHE JOINS US FOR AN EXCLUSIVE INTERVIEW. MEG, AS ALWAYS, WE APPRECIATE YOU BEING HERE AND WAKING UP EARLY IN THE MORNING TO JOIN US FROM THE WEST COAST.AS I SAID ARE YOU BEING REWARDED THIS MORNING IN THE MARKET – OR CERTAINLY WERE AFTER THE CLOSE YESTERDAY FOR YOUR BOTTOM LINE NUMBERS BUT I'D LOVE YOU TO ADDRESS THIS LARGER ISSUE SOME INVESTORS OR PROSPECTIVE INVESTORS HAVE WHICH IS ESSENTIALLY, YES, YOU'RE HITTING NEAR-TERM PROFITABILITY AND IN FACT GETTING BETTER AT PROFITABILITY THAN MANY EXPECTED BUT ARE YOU SACRIFICING MARKET SHARE, ARE YOU DELAYING R & D AND OTHER INVESTMENTS, ARE YOU PERHAPS NOT FULLY TAKING FINANCIAL BENEFITS OF PAST RESTRUCTURING ACTIONS. ESSENTIALLY ARE YOU SHRINKING TO PROFITABILITY?

WHITMAN: WELL, LET ME SET THE STAGE FOR YOU. WE ARE EMBARKED ON A FIVE-YEAR TURNAROUND JOURNEY. WE'RE ABOUT 18 MONTHS INTO THAT JOURNEY AND I THINK WE'RE RIGHT WHERE WE THOUGHT WE WOULD BE. IN FACT PROBABLY A LITTLE AHEAD OF SCHEDULE. WE GENERATED A LOT OF CASH THIS QUARTER, $3.6 BILLION AND BEAT EARNINGS PER SHARE, OUR HIGH END OF OUR GUIDANCE, BY 5 CENTS. IN FACT WE ARE INVESTING A LOT IN OUR BUSINESS. REMEMBER,WE'RE CREATING THE FINANCIAL CAPACITY TO INVEST THROUGH OUR RESTRUCTURING PROGRAM, AND THEN SOME OF THAT WE'RE BRINGING TO A BOTTOM LINE AND A LOT OF IT WE'RE INVESTING INTO THINGS LIKE MOON SHOT, THREE PAR, OUR HP NETWORKING,ENTERPRISE SERVICES, THE I.T. THAT RUNS THIS COMPANY THAT HAD NOT BEEN KEPT UP TO DATE. WE ARE INVESTING IN A LOT OF OUR INTERNAL PROCESSES. SO IT IS ALWAYS A BALANCE BUT I FEEL THAT WE HAVE LAID OUT THE INVESTMENT PLAN AND WE ARE MAKING THOSE INVESTMENTS SO WE ARE NOT MORTGAGING THE FUTURE. YOU WILL RECALL WHEN I CAME TO HP, I SAID I'M COMING TO SET THIS COMPANY UP FOR THE NEXT DECADE. NOT THIS QUARTER, NOT THIS YEAR AND WE ARE STICKING TO THAT. WE FEEL GOOD ABOUT WHERE WE ARE.

FABER: YOU OF COURSE SAY YOU'RE NOT MORTGAGING THE FUTURE. AND YOU HAVE SAID MANY TIMES IN INTERVIEWS IN THE PAST THIS IS A MULTI—YEAR TRANSFORMATION AND TRANSITION. BUT LOOKING AT EACH OF THOSE REPORTING SEGMENTS STILL DOWN, THOUGH SOME NOT THAT MUCH IN REVENUES, I DO WONDER AT WHAT POINT DO YOU SEE AT LEAST ONE OF YOUR BIG REPORTING SEGMENTS ACTUALLY TURNING UP IN TERMS OF REVENUES?

WHITMAN: WHAT WE'VE SAID IS WE DIDN'T THINK WE'D SEE REVENUE GROWTH IN 2013, OUR FISCAL 2013 WHICH ENDS OCTOBER 31st. BUT WE COULD DO BELIEVE GROWTH IS POSSIBLE IN 2014. PROBABLY NOT IN EVERY BUSINESS BUT WE HOPE OVERALL WE'LL SEE GROWTH IN 2014. YOU HAVE TO REMEMBER WE'RE UNDERTAKING A REBUILD OF HEWLETT-PACKARD AMID SOME OF THE BIGGEST CHANGES THAT THE TECHNOLOGY INDUSTRY HAS SEEN IN AT LEAST A DECADE.THERE ARE HUGE TECTONIC PLATE SHIFTS ABOUT THE WAY TECHNOLOGY IS CONSUMED, THE WAY IT IS BOUGHT, PAID FOR, THE WAY SOFTWARE IS WRITTEN AND DELIVERED, THE WAY END USERS ENGAGE WITH TECHNOLOGY SO THERE IS A LOT GOING ON IN OUR WORLD. BUT WE ARE GROWING BUSINESSES THAT POWER THE NEW STYLE OF I.T. WE'VE GOT DECLINING BUSINESSES THAT POWERED THE OLD STYLE OF I.T. SO WE'RE IN THAT KNOT HOLE THAT ONE HAS TO GET THROUGH BUT I FEEL GOOD ABOUT THE GROWTH PROSPECTS FOR 2014.

FABER: PRINTING HAS BEEN A BRIGHT SPOT FOR THE COMPANY AT LEAST THE LAST TWO QUARTERS. MARGINS BETTER THAN THOSE WHO FOLLOWED THE COMPANY CLOSELY HAD ANTICIPATED I KNOW YOU HAVE UNDERTAKEN A NUMBER OF DIFFERENT PROGRAMS THERE. IS THAT MARGIN LEVEL -- LET'S CALL IT RIGHT AROUND 16% -- SUSTAINABLE AND DO YOU SEE PRINTING PERHAPS EVEN MAKING THAT TURN TO REVENUE POSITIVE LET'S CALL IT THE NEXT 9 TO 12 MONTHS?

WHITMAN: YEAH. SO WE THINK THE MARGIN IS SUSTAINABLE AND THE TEAM'S DOING A GREAT JOB, PRINTING TEAM DOING A GREAT JOB IN INNOVATING NOT ONLY IN TECHNOLOGY, INK IN THE OFFICE WHICH IS BASICALLY JUST AS FAST AS LASER, JUST AS GOOD QUALITY AS LASER AT HALF THE COST AND WE'VE DONE SOME INCREDIBLE TECHNOLOGY INNOVATION BUT WE'RE ALSO INNOVATING AROUND THE BUSINESS MODEL, IN DEVELOPING COUNTRIES WE HAVE A MODEL CALL INK ADVANTAGE WHERE THE PRINTER IS A SLIGHTLY HIGHER COST BUT THE INK IS A LOT LOWER COST. THAT'S TAKING OFF REALLY WELL. WE ARE INTRODUCING SUBSCRIPTION INK IN THE U.S. NEXT QUARTER. SO WE GOT A LOT OF THINGS GOING ON THERE. I DO THINK ACTUALLY GROWTH IS POSSIBLE THERE. HOME PRINTING AND PHOTO PRINTING IS STILL DECLINING BUT WE SEE LOTS OF OTHER GROWTH SEGMENTS. SO WE'RE OPTIMISTIC ABOUT PRINTING AND I THINK CONCERNS PEOPLE HAD ABOUT PRINTING A YEAR AGO ARE STARTING TO DISSIPATE.

FABER: THEY DO SEEM TO BE. OF COURSE CONCERNS WHEN IT COMES TO THE PC PART OF THE BUSINESS AREN'T DISSIPATING. IT DOES SEEM WE'RE IN THE MIDST OF SOMETHING PERHAPS FEW PEOPLE HAVE SEEN IN TERMS OF A CHANGE IN A BUSINESS SO SIGNIFICANTLY IN SUCH A SHORT AMOUNT OF TIME, DOWN 20% IN PERSONAL SYSTEMS. WHERE IS THE BOTTOM, MEG, WHEN IT COMES TO PCs AND DID YOU CHOOSE TO CHASE PRICE ALL THE WAY DOWN HERE AND CONTINUE TO TAKE MARGIN OUT OF THE BUSINESS?

WHITMAN: SO WE ARE SEEING ONE OF THE BIGGEST SHIFTS OF I'VE SEEN IN MY PROFESSIONAL CAREER. PERSONAL SYSTEMS IS GROWING BECAUSE THE DESIRE TO COMPUTE, TO SHARE, TO CREATE, I THINK IS ONLY GROWING BUT THE FORM FACTORS ARE CHANGING DRAMATICALLY. SO, BY THE WAY, IS THE OPERATING SYSTEM AND THE CHIP ARCHITECTURES. SO SING A MULTI-OS, MULTI-FORM STRATEGY. BUT WE HE HAVE TO GET TO THE NEW WORLD ORDER AS FAST AS WE CAN. AND WE DIDN'T CHASE MARGINS ALL THE WAY DOWN HERE. A NUMBER OF OUR COMPETITORS,DELL IN PARTICULAR, WAS VERY AGGRESSIVE IN THIS SPACE AND YOU SAW WHAT THEY DID. THEY CRATERED THEIR MARGINS AND MAYBE THAT'S WHAT YOU DO WHEN YOU'RE GOING TO GO PRIVATE BUT WE CAN'T DO THAT BECAUSE WE NEED TO HAVE MARGINS TO INVEST IN THE NEXT GENERATION OF PERSONAL DEVICES BECAUSE WHEN THE PC MARKET BEGINS TO LEVEL OUT, AND I THINK IT WILL – I DON'T YOU'LL SEE THIS LEVEL OF DECLINE

FABER: MEG, LET ME JUST STOP YOU. I DON'T MEAN TO INTERRUPT, BUT LEVEL OUT. WHY WOULD YOU THINK – SOME WOULD SAY IT IS OVER. THERE'S NOT GOING TO BE A SIGNIFICANT INCREASE IN PC SALES ANYTIME, MAYBE IN OUR LIFE TIMES. EVERYBODY'S GOING TO TABLETS AND LEVELING OUT,FORGET ABOUT IT. THAT'S YEARS AWAY.

WHITMAN: I MEAN THAT'S NOT MY VIEW. BY THE WAY, I CAN BE PROVEN WRONG HERE BUT THINK ABOUT IT. THERE IS 140 MILLION LAPTOPS THAT ARE MORE THAN FOUR YEARS OLD. PEOPLE ARE STILL DOING REAL WORK ON THEIR LAPTOPS AND TABLETS ARE GREAT BUT IF YOU'RE DOING OFFICE OR EXCEL OR REAL CREATION, IT IS VERY HARD TO DO THAT ON YOUR TABLET. WE'RE INVESTING IN HYBRIDS WHERE YOU HAVE A LAPTOP PLUS A TABLET BECAUSE THE SCREEN COMES OFF SO IT'S ALL TABLET, ALL LAPTOP, ALL IN ONE. I THINK THAT'S THE DIRECTION THE INDUSTRY MAY GO. I THINK -- LISTEN. MY VIEW IS PEOPLE WANT TO CREATE, CONSUME AND SHARE AND I THINK THAT FORM FACTOR WILL HAVE A FUTURE BUT I -- LISTEN. I AGREE WITH YOU THE REAL GROWTH IN THE MARKET IS TABLETS AND SMARTPHONES AND WE'RE ON TO A WHOLE NEW ERA IN PERSONAL COMPUTE, NO QUESTION ABOUT IT.

CRAMER: MEG WHITMAN, JIM CRAMER HERE. THANK YOU SO MUCH FOR COMING ON. CONGRATULATIONS ON THE AMAZING WORK YOU DID ON THE BALANCE SHEET. I REMEMBER WHEN YOUR CREDIT RATING WAS REALLY STRUGGLING. I REMEMBER WHEN I FELT THAT THE ISSUE WAS GOING TO BE WHETHER YOU GOT WOULD BE ABLE TO OFFER THE CREDIT TO OTHER GUYS. YOU HAVE FIXED THAT. I UNDERSTAND THAT YOU WILL BE IN CASH YOU WILL BE POSITIVE BY THE END OF THIS YEAR BUT I WANT TO ASK YOU, I SAW SOMETHING VERY SIGNIFICANT, APROPOS WHAT DAVID SAID. YOU MENTIONED A.R.M. HOLDINGS AND YOU MENTIONED ANDROID. IF YOU'RE GOING TO BUILD A NEW SYSTEM THAT'S DIFFERENT FROM THE CRATERING DELL, IS THIS THE BEGINNING OF YOU MOVING AWAY FROM INTEL AND MICROSOFT?

WHITMAN: WELL, WE'RE DIVERSIFYING, THERE IS NO QUESTION ABOUT IT. WE'LL ALWAYS MAKE WINTEL DEVICES.WE HAVE A LONG AND VERY GOOD RELATIONSHIP WITH THOSE TWO COMPANIES BUT WE HAVE TO DIVERSIFY TO NEW OPERATING SYSTEMS AND NEW CHIP SETS SO WE'RE BUILDING A.R.M., CHROME BOOKS, ANDROID SYSTEMS, WE HAVE OUR NEW SLATE 7, OUR SEVEN-INCH TABLET THAT RUNS ANDROID ON AN A.R.M. CHIP AND THAT'S THE DIRECTION WE MUST GO.WHAT WE'RE GOING TO DO IS BASICALLY SEGMENT THE MARKET AND CREATE THE RIGHT PRODUCT FOR THAT MARKET AT THE RIGHT PRICE. SOMETIMES THAT REQUIRES ANDROID AND AN ARM CHIP SET. SOMETIMES THAT REQUIRES WINDOWS AND AN INTEL CHIP DEPENDING ON THE MARKET SEGMENT BUT THIS IS GOING TO BE THE NEW WORLD ORDER.

CRAMER: YOU ALSO TEASE THIS MOON SHOT WHICH I THOUGHT WAS QUITE EXTRAORDINARY. 80% LESS SPACE 89% LESS ENERGY. IS THIS AN EMC KILLER?

WHITMAN: WELL, THIS WILL REVOLUTIONIZE THE DATA CENTER. AND LARGELY WILL I THINK CHANGE THE FUNDAMENTAL DIRECTION OF HYPERSCALE. WHAT MOON SHOT DOES IS IN THE OLD DAYS, BASICALLY THE APP WAS DRIVEN BY THE HARDWARE. TODAY THE APP DRIVES THE HARDWARE. SO WHEN YOU THINK ABOUT THESE BIG HYPERSCALE DEALS, EFFECTIVELY THEY ARE TUNED FOR ONE WORKLOAD. AND WHAT MOON SHOT DOES IS MAKE THAT INCREDIBLY EASY, VERY COST EFFECTIVELY, VERY ENERGY EFFICIENT AND VERY SPACE EFFICIENT. SO I THINK THIS COULD BE A REVOLUTION IN THE ENTIRE SERVER BUSINESS, NOT DISSIMILAR TO THE INTRODUCTION OF THE X86 SERVER 24 YEARS AGO WHICH HP INVENTED.

FABER: MEG, I'D LOVE TO GET YOUR TAKE ON THE WORLD. IN THE PRESS RELEASE IN YOUR CONFERENCE CALL YOU MENTIONED CONTINUED WEAKNESS IN EUROPE. NOTHING NEW THERE. BUT DID YOU BRING UP CHINA AS A WEAK SPOT. I KNOW PCs, INDUSTRY STANDARDS, SERVERS ARE SORT OF THE KEY MARKET THAT YOU HAVE THERE. WHAT'S GOING ON IN CHINA?

WHITMAN: WELL, WE HAVE SEEN A SLOWDOWN IN CHINA. WE ALSO HAVE A VERY BIG NETWORKING BUSINESS IN CHINA, YOU MIGHT RECALL. AND WE HAVE A SERVICES BUSINESS. WE ACTUALLY HAVE THE WHOLE PORTFOLIO IN CHINA. WHAT WE SEE IN CHINA IS THAT THERE WILL BE A SLOWDOWN AND THE GOVERNMENT WILL TAKE SOME ACTIONS AND YOU'LL SEE A PICK-UP AGAIN, THEN IT WILL SLOW DOWN AGAIN. IN AT LEAST THE LAST COUPLE OF MONTHS WE'VE SEEN A SLOWDOWN. SO IT WILL BE INTERESTING TO SEE WHAT THE GOVERNMENT DECIDES TO DO TO JUICE THAT ECONOMY. BUT IT'S BEEN TOUGH THE LAST FOUR TO FIVE MONTHS IN CHINA,NO QUESTION ABOUT IT.

FABER: AND MEG, FINALLY, YOU MADE A CHOICE, OF COURSE, NOT LONG AFTER TAKING THE CEO POSITION TO KEEP THE COMPANY TOGETHER. THERE HAD BEEN THE POTENTIAL OF ACTUALLY SPINNING OFF OR SEPARATING PERSONAL SYSTEMS. I WONDER WITH ALL THE SALES DECLINES THERE AND WITH HOW DIFFICULT IT IS, HAVE YOU THOUGHT ABOUT REVISITING THAT DECISION?

WHITMAN: SO WE CONTINUE TO BELIEVE THAT KEEPING HP TOGETHER IS THE RIGHT THING TO DO AND THE REASON WE CHOSE TO STAY IN PERSONAL COMPUTE IS WE KNOW A LOT ABOUT COMPUTING. WE KNOW A LOT ABOUT CONVERGENCE AND WE KNOW A LOT ABOUT SECURITY WHICH I THINK ARE GOING TO BE THREE VERY IMPORTANT PARTS GOING FORWARD OF THE PERSONAL COMPUTE BUSINESS. SO WE'RE HAPPY WITH THE PORTFOLIO WE HAVE. WE THINK IT IS WELL POSITIONED FOR THIS NEW STYLE OF I.T. SO ONWARD IN THE SAME DIRECTION. WE'RE GOING TO CONTINUE TO WORK ON THIS MULTI-YEAR TURNAROUND PLAN. SO FAR, SO GOOD.WE JUST HAVE TO KEEP EXECUTING AND WE GOT A HEAVY LIFTING AHEAD.

FABER: BOARD ANY CLOSER TO GETTING A PERMANENT CHAIRMAN?

WHITMAN: SO WE'RE WORKING ON IT AND WE'VE HAD SOME GOOD INTEREST BY PEOPLE WHO ARE WELL KNOWN AND REALLY HIGHLY QUALIFIED. NOTHING TO ANNOUNCE TODAY BUT WE ARE WORKING ON IT.

FABER: MEG, AS ALWAYS, WE REALLY APPRECIATE YOUR WILLINGNESS TO TAKE THE TIME WITH US. GOOD NEWS OR BAD NEWS, YOU'VE BEEN THERE FOR US. THANK YOU, AS ALWAYS, TO MEG WHITMAN, CEO OF HEWLETT-PACKARD.


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