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

WHEN: Today, Wednesday, February 25th

WHERE: CNBC's "Squawk on the Street"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Hewlett-Packard CEO Meg Whitman and CNBC's David Faber on "Squawk on the Street" (M-F, 9AM-11AM ET) today. Following are links to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000357160 and http://video.cnbc.com/gallery/?video=3000357222.

All references must be sourced to CNBC.

DAVID FABER: TAKE A LOOK AT SHARES OF HEWLETT-PACKARD. YOU CAN SEE THEY ARE DOWN AS MUCH AS WHAT MAY BE ALMOST 7% THIS MORNING AFTER THE TECH GIANT'S EARNINGS WERE AHEAD OF ESTIMATES BY ONE PENNY. REVENUE WAS A BIT SHORT OF ESTIMATES, BUT THE KEY WAS THE COMPANY WARNING THAT THE STRONG DOLLAR IS TAKING A SIGNIFICANT BITE OUT OF ITS FULL YEAR PROFITS AND THEREFORE, IT LOWERED ITS GUIDANCE. JOINING ME NOW IN AN EXCLUSIVE INTERVIEW TO BREAK DOWN THE QUARTER AND WHAT'S LEFT OF THE YEAR, AND EVERYTHING ELSE, HEWLETT-PACKARD'S CHAIRMAN AND CEO, MEG WHITMAN. ALWAYS A PLEASURE TO HAVE YOU, MEG. THANK YOU FOR BEING HERE.

MEG WHITMAN: YEAH, HAPPY TO SEE YOU THIS MORNING.

FABER: LET'S START ON THE REVENUE FRONT. I KNOW WE'LL GET TO THE DOLLAR AS WELL AND THAT MAY FIGURE INTO IT. DOWN 2% ON CONSTANT CURRENCY FOR THE FIRST QUARTER, YET YOU STILL STICK WITH THE IDEA THAT YOU CAN HAVE FLAT REVENUES, AGAIN, ON CONSTANT CURRENCY FOR THE YEAR. WHY?

WHITMAN: WELL, THERE'S SOME REAL BRIGHT SPOTS IN THE BUSINESS. THE PC BUSINESS CONTINUES TO DO WELL. PERHAPS THE BIGGEST TURNAROUND IN THE LAST COUPLE OF YEARS, LAST COUPLE OF QUARTERS, IS OUR INDUSTRY STANDARD SERVER BUSINESS WHICH GREW 9% IN CONSTANT CURRENCY. WE HAD A GOOD SECURITY BUSINESS, GRAPHICS BUSINESS. SO SOME REAL BRIGHT SPOTS. AND OF COURSE THE KEY TO GROWTH IN THE FUTURE IS THE TURNAROUND OF ENTERPRISE SERVICES WHICH STILL DECLINED DUE TO KEY ACCOUNT RUN-OFF AND WEAKNESS IN EMEA, BUT WE EXPECT A BETTER SECOND HALF IN THE GROWTH RATE OF ENTERPRISE SERVICES. SO I THINK FLAT CONSTANT CURRENCY IS A REALLY GOOD ESTIMATE FOR THE REST OF THE YEAR. WE FEEL CONFIDENT IN THAT.

FABER: NOW YOU MENTIONED, OF COURSE, STORAGE. NETWORKING IS ANOTHER AREA, I THINK, PEOPLE HAVE BEEN LOOKING AT WITHIN ENTERPRISE THAT THEY FELT WOULD BE A GROWTH ENGINE. IT HAS NOT BEEN AT THIS POINT. AND I'M CURIOUS, WHEN WE LOOK AT NETWORKING, OR STORAGE IN FACT, I MEAN, ARE YOU SEEING INCREASED COMPETITION? THE LIKES OF A CISCO, MEG, SEEMS TO BE DOING QUITE WELL. I'M CURIOUS AS TO WHAT YOUR THOUGHTS ARE ABOUT WHETHER YOU ARE LAGGING.

WHITMAN: WELL, LET'S TAKE STORAGE FIRST. SO STORAGE HAS BEEN A GREAT TURNAROUND STORY AT HP. FINALLY OUR NEW STORAGE PRODUCTS ARE BIGGER THAN THE LEGACY STORAGE PRODUCTS, SO WE'VE CROSSED THAT CHASM, IF YOU WILL, AND WE GREW STORAGE AND 3PAR HAD A TERRIFIC QUARTER. SO WE'RE QUITE CONFIDENT IN OUR STORAGE BUSINESS. WE WON AN AWARD FOR ONE OF THE BEST STORAGE PRODUCTS FROM A REALLY GREAT SOURCE. SO WE'RE FEELING GOOD ABOUT THAT BUSINESS. NETWORKING HAS GROWN FOR 21 CONSECUTIVE QUARTERS. THIS QUARTER WAS NOT A GOOD QUARTER FOR NETWORKING. AND A COUPLE OF EXECUTION ISSUES. ONE IN THE UNITED STATES, ONE IN CHINA, WE'VE CHANGED OUT OUR CHINA LEADERSHIP TEAM IN NETWORKING. WE'RE MAKING SOME CHANGES TO THE U.S. SALES FORCE INCENTIVES, BUT IT'S A DYNAMIC MARKET. CREDIT TO CISCO, THEY DID HAVE A GOOD QUARTER IN NETWORKING SO WE'VE GOT TO FIGHT BACK.

FABER: THESE ARE GOING TO BE THE KEY COMPONENTS TO A CERTAIN EXTENT OF WHAT IS MORE OF A GROWTH STORY IN WHAT WILL BE THE SPLIT OFF HEWLETT-PACKARD ENTERPRISES, MEG. I WONDER, LOOKING OVERALL, I HEAR YOU SAY I EXPECT TO BE FLAT REVENUES CONSTANT CURRENCY FOR THE YEAR. A FEW YEARS AGO, OF COURSE, THAT WOULD HAVE BEEN QUITE AN ACCOMPLISHMENT. BUT I WONDER, ARE YOU DISAPPOINTED AT ALL? THREE PLUS YEARS INTO THE TURNAROUND, THAT YOU ARE STILL TALKING ABOUT JUST BEING FLAT ON REVENUES?

WHITMAN: WELL, I'M PRETTY PLEASED WITH THE TURNAROUND OVERALL. I MEAN WHEN YOU THINK OF FROM WHENCE THIS COMPANY CAME 3 ½ YEARS AGO, I THINK WE'VE MADE REMARKABLE PROGRESS. AND FLAT AND CONSTANT CURRENCY, WHILE IT'S NOT WHAT WE ASPIRE TO, YOU REMEMBER 2 ½ , 3 YEARS AGO WE WERE DECLINING 7% A QUARTER, 6% A QUARTER – I THINK THE WORST QUARTER WAS 9% DECLINE YEAR-OVER-YEAR. SO WE'RE FEELING PRETTY GOOD ABOUT THIS. AND I THINK, IF YOU THINK OF – IF HP WERE GOING TO STILL BE TOGETHER IN 2016, I'M QUITE OPTIMISTIC THAT WE WOULD GROW. SO I – AND REMEMBER, THE PREMISE OF THE SPLIT WAS TO ACCELERATE THE GROWTH OF THESE TWO COMPANIES BY MORE FOCUS, MORE AGILITY, BEING ABLE TO RESPOND QUICKER TO CUSTOMER NEEDS. SO I'M PRETTY BULLISH ON THE FUTURE OF THESE TWO COMPANIES. THEY'VE GOT VERY DIFFERENT OPPORTUNITIES, VERY DIFFERENT MARKETS TO GO AFTER. QUITE DIFFERENT CUSTOMER SEGMENTS. BUT I AM MORE CONVINCED THAN I WAS EVEN ON OCTOBER 6th WHEN WE ANNOUNCED THE SEPARATION THAT THIS IS GOING TO BE GREAT FOR CUSTOMERS AND GREAT FOR THE PROSPECTS OF BOTH HP COMPANIES.

FABER: WHY? WHY DO YOU BELIEVE THAT MORE THAN YOU DID IN OCTOBER?

WHITMAN: WELL, FIRST OF ALL YOU CAN JUST SEE, FIRST OF ALL THE CUSTOMER AND PARTNER RESPONSE HAS BEEN TREMENDOUS. THEY IMMEDIATELY GET THIS. AND YOU CAN ACTUALLY ALREADY SEE THE BEHAVIORAL CHANGE WITHIN HP. EMPLOYEES HAVE A MUCH CLEARER NOW LINE OF SIGHT BETWEEN WHAT THEY DO AND WHAT THE RESULTS ARE. THEY'RE VERY FOCUSED ON THE MARKET. YOU KNOW WHEN YOU'RE IN A BIG COMPANY, EVERYONE FEELS TO SOME EXTENT, WELL GEE, IF I DO A GREAT JOB WILL IT REALLY MATTER BECAUSE I'M PART OF THIS HUGE COMPANY. NOW THAT WE'RE SEPARATING INTO TWO COMPANIES, ACTUALLY, THE EMPLOYEES CAN FEEL THE ENERGY AROUND WHAT THEY DO. I THINK IT'S – THERE'S A CULTURAL ELEMENT TO IT. WE'RE ALSO AGAIN GOING TO LEAN OUT THESE TWO COMPANIES. AS WE SEPARATE, WE'RE SEEING OPPORTUNITIES TO BECOME MORE EFFICIENT, TO HAVE END TO END PROCESS OWNERS. WE'RE FINDING THINGS THAT WE DO TODAY THAT WE DON'T NEED TO DO. SO IT'S ANOTHER CHAPTER IN THE HP TURN AROUND HISTORY THAT I THINK IS ACTUALLY GOING REALLY WELL AND IS QUITE EXCITING.

FABER: SO I THINK I HEAR YOU SAY WITHIN THAT, I MEAN, OBVIOUSLY RESTRUCTURING HAS BEEN A PART OF WHAT YOU'VE DONE AT HEWLETT-PACKARD OVER THESE LAST THREE-PLUS YEARS. 44,000 JOB CUTS ON WAY TO I THINK 55,000. BUT WHAT I BELIEVE I HEAR FROM YOU, MEG, IS THERE MAY BE MORE OPPORTUNITIES TO CUT COSTS AS A RESULT OF YOU GUYS LOOKING SO CLOSELY AT ALL OF THE DIFFERENT LINE ITEMS IN THESE BUSINESSES, IS THAT CORRECT?

WHITMAN: I THINK THAT'S RIGHT. AND WHEN YOU LOOK AT ALL OF OUR PROCESSES, WHEN YOU LOOK AT WHERE WE OPERATE AROUND THE GLOBE, THERE IS OPPORTUNITIES TO BE A MORE EFFECTIVE AND MORE EFFICIENT. THINK ABOUT IT, WE HAVE 600 SITES STILL AROUND THE WORLD. WHEN I CAME, WE HAD 850 OFFICES. NOW WE HAVE 600. THERE'S AN OPPORTUNITY TO SKINNY THAT DOWN. THERE'S AN OPPORTUNITY TO MAKE A FEW MORE CHANGES TO THE PORTFOLIO, TO FOCUS THE EFFORTS OF OUR SALES EXECUTIVES. SO I THINK THERE IS OPPORTUNITY TO BE MORE FOCUSED AND MORE EFFICIENT. SO, YOU KNOW, THIS IS VERY GOOD FOR OUR CUSTOMERS. YOU HAVE TO REMEMBER, THIS IS A VERY COMPETITIVE BUSINESS. WE'RE FACING INCREASED COMPETITION FROM CHINESE COMPANIES. SO WE HAVE TO HAVE TWO FIT FOR PURPOSE COMPANIES.

JIM CRAMER: MEG, JIM CRAMER. I ALWAYS TAKE MY CUE FROM A CEO. YOU USE WORDS IN THIS CONFERENCE CALL THAT YOU WERE DISAPPOINTED IN EXECUTION. DION, WHO IS TERRIFIC, I ABSOLUTELY LOVE DION. HE'S THE PRINTING GUY. HE'S TALKING ABOUT, AND USED THE WORD FIERCE COMPETITION FROM THE JAPANESE, WHO BENEFIT FROM THE CURRENCY, OBVIOUSLY, VERY BAD FOR THE UNITED STATES. AND THEN THIS CASH FLOW PROJECTION. 6.5 BILLION TO 7 BILLION, NOW IT GOES DOWN TO 3.5 TO 4 BILLION. MEG, THESE ARE NOT THE KINDS OF THINGS THAT ENCOURAGE ME TO BUY HEWLETT-PACKARD. AND THE ONLY REAL BUYER, YOU GUYS BOUGHT A TON OF IT. AND I WOULD HAVE HOPED YOU USED THAT CAPITAL MAYBE TO GO TO THE PRINTING DIVISION. BECAUSE MEG, YOU DID NOT SAY AS MANY POSITIVE THINGS IN THIS QUARTER AS I WAS HOPING.

WHITMAN: REMEMBER THE DIFFERENCE BETWEEN OUR CASH FLOW FORECAST TO 6.5 BILLION TO $7 BILLION IS ACTUALLY INTACT EXCEPT FOR TWO IMPORTANT THINGS. ONE IS THE COST OF SEPARATION, WHICH IS – THIS QUARTER'S THE FIRST TIME WE ACTUALLY WERE ABLE TO LAY OUT IN DETAIL THE COST OF THE SEPARATION – AND THEN ACROSS THE CURRENCY IMPACT. THE CURRENCY IMPACT IS BIG ON HEWLETT-PACKARD. WE ARE DISPROPORTIONATELY AFFECTED, 65% OF OUR BUSINESS IS OUTSIDE THE UNITED STATES. HALF OF THAT IS IN EUROPE. SO WE HAVE ENORMOUS EXPOSURE TO THE EURO AND TO THE POUND. AND THEN YOU RIGHTLY POINTED OUT THE ADVANTAGE THAT OUR JAPANESE PRINTING COMPETITORS HAVE. THAT WAS, BELIEVE IT OR NOT, $3.3 BILLION OF REVENUE HEADWINDS, 1.5 BILLION OF PROFIT HEADWINDS OR 60 CENTS A SHARE. WE'RE GOING TO TRY TO COVER HALF OF THAT THROUGH COST REDUCTION AND PRICING. BUT WE DID NOT WANT TO MORTGAGE THE FUTURE OF THIS COMPANY. WE HAVE MANAGED THE FUTURE OF THIS COMPANY FOR THE LONG TERM, WHILE DELIVERING ON OUR COMMITMENTS IN THE QUARTER. SO WE THOUGHT IF WE TRIED TO COVER THE OTHER 60 CENTS, WHICH HAS LED TO A LOWER CASH FLOW FORECAST, IT WOULDN'T BE THE RIGHT THING FOR THE COMPANY. SO, MY VIEW IS, WE HAD A SOLID EXECUTIONAL PERFORMANCE IN THE BUSINESS. CURRENCY IS A TOUGH THING FOR US. AND I THINK YOU'RE GOING TO SEE OTHER AMERICAN COMPANIES HAVE SOME OF THE SAME CHALLENGES, ALTHOUGH WE ARE OVEREXPOSED TO EUROPE. BY THE WAY, PRINTING IN RUSSIA, WE HAVE A VERY BIG PRINTING BUSINESS IN RUSSIA, WE ALL KNOW WHAT'S HAPPENING IN RUSSIA. SO TOUGH MACRO ECONOMIC TRENDS. I STILL THINK VERY GOOD EXECUTION FOR HP.

FABER: YEAH. ALTHOUGH NOT PARTICULARLY TOUGH TRENDS GLOBALLY IN TERMS OF THE ECONOMY, MEG. I WOULD THINK HERE IN THE STATES AND IN MANY OF THE OTHER COUNTRIES IN WHICH YOU OPERATE, THE ECONOMY AT LEAST, EVEN IN EUROPE, PERHAPS, WE ARE STARTING TO SEE SOME SIGNS OF GROWTH. TRUE?

WHITMAN: YEAH, SO LISTEN IF YOU LOOK AT OUR REVENUE AND CONSTANT CURRENCY IN EUROPE, LOOKS PRETTY GOOD. IF YOU LOOK AT THE NUMBER OF UNITS, WHETHER IT'S OUR INDUSTRY STANDARD SERVERS OR PCs OR WHATEVER, QUITE GOOD. PCs WERE UP 9% IN UNITS, BUT ONLY 3% IN CURRENCY AS REPORTED IN CONSTANT CURRENCY, BECAUSE OF THE HEADWINDS. SO WE'RE SEEING BRIGHT SPOTS IN EUROPE. WE'RE SEEING THE U.S. IS RECOVERING. BUT YOU'VE GOT CHALLENGES STILL IN JAPAN IN THE ECONOMY, YOU'VE GOT CHALLENGES, BIG CHALLENGES IN RUSSIA AND PARTS OF EASTERN EUROPE. SO IT'S A MIXED BAG. AND THEN OF COURSE, OVER THE WHOLE THING IS CURRENCY. BUT LISTEN, WE'RE ON TRACK, WE ARE CONTINUING TO INVEST IN INNOVATION. WE'VE GOT MORE INNOVATION COMING IN THE SECOND HALF OF THE YEAR. OUR GEN 9 SERVER HAS BEEN INCREDIBLY WELL RECEIVED. OUR NEW LINE OF PRINTERS AND PCs ARE WELL RECEIVED. OUR STORAGE, OUR ALL FLASH STORAGE ARRAY HAS BEEN VERY WELL RECEIVED. SECURITY'S A GROWTH SPOT. SO LISTEN, THERE'S ALWAYS GOOD SPOTS AND TOUGH SPOTS IN A BIG COMPANY LIKE THIS. BUT I FEEL REALLY GOOD ABOUT WHERE WE ARE IN THE TURNAROUND. WHAT I'VE SAID THE LAST COUPLE OF QUARTERS, PROGRESS BUT MORE WORK TO DO, NO QUESTION ABOUT IT.

FABER: NO, YOU HAVE. YOU HAVE IN FACT SAID THAT. SOMETHING THAT INVESTORS HAVE RALLIED AROUND OVER THESE LAST COUPLE OF YEARS, MEG, HAS BEEN I THINK THE UNEXPECTEDLY STRONG FREE CASH FLOW GENERATION OF THE COMPANY. JIM ASKED THE QUESTION, YOU ANSWERED IT. 3.5 BILLION TO 4 BILLION THE FREE CASH FLOW PROJECTION FOR THIS YEAR GIVEN THOSE SEPERATION COSTS AND AS YOU SAID THE IMPACT OF THE DOLLAR. THAT SAID, YOU WERE NEGATIVE FREE CASH FLOW IN THE FIRST QUARTER AND I THINK THAT WAS SOMEWHAT UNEXPECTED. WHY WAS THAT THE CASE?

WHITMAN: WE WERE UNEXPECTED – IT WAS BELOW OUR EXPECTATIONS, BUT GOOD REASONS FOR IT. LARGELY TIMING. BUT, FIRST IS OUR CASH CONVERSION CYCLE DID GO UP. WE ANTICIPATED IT WOULD GO UP. IT WENT UP BY MORE THAN WE ANTICIPATED BUT WE ARE MAKING TRADE-OFFS NOW EVERY DAY BECAUSE OUR BALANCE SHEET IS NOW STRONG. WE MAKE DECISIONS. OKAY, DO WE WANT TO PUT THOSE PCs OR SERVERS ON A BOAT, WHICH INCREASES INVENTORY, OR DO WE WANT TO PUT THEM ON A PLANE THAT DECREASES INVENTORY BUT INCREASES THE COST OF GOODS SOLD. SO WE'RE MAKING THOSE TRADE-OFFS ON SOME VERY BIG DECISIONS. SO CASH CONVERSION CYCLE WENT UP AS WE ANTICIPATED. HP FINANCIAL SERVICES HAD A TERRIFIC QUARTER, BUT AT THE BEGINNING OF A CYCLE OF FINANCING THAT IS A BIG USE OF CASH. AND THEN THERE WERE A NUMBER OF ONE-TIME ITEMS THAT ACTUALLY WE'LL GET THE BENEFIT OF IN Q2, Q3, AND Q4. AND AGAIN, WE REITERATED THAT BUT FOR OPERATION AND CURRENCY WE WOULD BE STICKING TO OUR CASH FLOW FORECAST THAT WE GAVE IN SEPTEMBER OF 6.5 TO $7 BILLION.

FABER: UNDERSTOOD.

WHITMAN: SO WE THINK THIS IS LARGELY A TIMING ISSUE, BUT IT CAME IN A BIT BELOW OUR EXPECTATIONS. AND AS YOU CAN IMAGINE, WE'RE ALL OVER IT.

FABER: ALRIGHT. AND MEG, FINALLY, $1.3 BILLION, YOU'VE QUANTIFIED THE COSTS OF THE SEPARATION IN THIS FISCAL YEAR. ANOTHER HALF A BILLION NEXT YEAR. ITS – YOU KNOW, MONDELEZ AND KRAFT, I KNOW THE SPLIT THERE COST 1.7 BILLION TO PUT IT INTO PERSPECTIVE. IT'S A HUGE NUMBER. IT'S A HUGE SPLIT, THOUGH. ARE YOU STILL ON TRACK? IS IT YOUR EXPECTATION, THAT LET'S CALL IT EARLY NOVEMBER THERE ARE GOING TO BE TWO COMPANIES?

WHITMAN: YEAH, THAT IS OUR ANTICIPATED DEADLINE, WHICH IS THE BEGINNING PART OF NOVEMBER OF THIS YEAR. WE ARE ON TRACK, WE'RE EXECUTING. IT IS A BIG AND COMPLICATED SEPARATION. THERE'S NEVER BEEN ANYTHING DONE QUITE LIKE THIS, SEPARATING INTO TWO FORTUNE 50 COMPANIES. IMAGINE THAT. THERE'S TWO FORTUNE 50 COMPANIES IMBEDDED IN HP TODAY. YOU CAN IMAGINE, TAX AND LEGAL ENTITY SEPARATION, FINANCE, THE I.T. SEPARATION. SO IT'S EXPENSIVE, BUT IT'S ONLY 2% OF OUR ANNUAL OPERATING COSTS AND THAT SEEMS IN LINE WITH WHAT OTHER COMPANIES HAVE SPENT AND WE'RE TRYING TO DO IT AS COST EFFECTIVELY AS WE CAN. BUT YOU CAN IMAGINE WE OPERATE IN 170 COUNTRIES. WE HAVE 2700 I.T. SYSTEMS, 600 OFFICES, 6 REALLY MAJOR LINES OF BUSINESS. SO THERE'S A LOT OF WORK, BUT I'M REALLY, REALLY PROUD OF OUR EXECUTIVE TEAM AND THE FOLKS THAT ARE WORKING ON THE SEPARATION. IT IS LIKE A MILITARY OPERATION. IT'S LIKE CLOCK WORK. SO WE FEEL REALLY GOOD ABOUT WHERE WE ARE. A LOT MORE WORK TO BE DONE, OF COURSE, BETWEEN NOW AND NOVEMBER, BUT ALL ON TRACK.

FABER: WELL MEG, WE'LL BE CHECKING IN WITH YOU BETWEEN NOW AND THEN, AS WE ALWAYS DO. AND VERY MUCH APPRECIATE YOUR WILLINGNESS TO COME ON EACH QUARTER. MEG WHITMAN, CHAIRMAN AND CEO OF HEWLETT-PACKARD.

WHITMAN: THANKS VERY MUCH, DAVID. THANKS, JIM.

FABER: THANK YOU.

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