CNBC News Releases


Jennifer Dauble



Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Incoming Hewlett-Packard CEO Meg Whitman and Hewlett-Packard Chairman Ray Lane today, Friday, September 23rd at 11AM ET on CNBC's "The Call."

All references must be sourced to CNBC.

Meg Whitman's Plans to Revive HP

Meg Whitman's Plans to Revive HP, Pt. 2

Meg Whitman's Plans to Revive HP, Pt. 3

DAVID FABER: Thank you very much, Tyler. We've already got some reactions-- going here. And we've already got some reactions-- going here to-- as you can see us in Cupertino, California to that board that you just saw. Ray Lane, Meg Whitman. You saw-- you said to Meg, "Make sure you don't get on there." That

RAY LANE: Yeah, I said our--goal is that she doesn't get on that gallery of pictures you just showed. And-- even though there were a couple of interim CEOs that last two months that there were CFOs that stepped up between CEOs, there's really been five CEOs since 1999.

DAVID FABER: Right. Of course the last of those before Meg was Léo Apotheker, hired about 10 or 11 months ago, when you joined the board as well as the non-executive chairman at that time

RAY LANE: That's right.

DAVID FABER: Nonetheless, I'm curious as a member of the board-- why did the board decide to fire Mr. Apotheker?

RAY LANE: Well, the last-- 10 months to a year our performance has not been good, so every quarter-- we've disappointed the market with our operational performance. And we've got it down. So we've been monitoring-- that's our job as a board is to monitor the performance of the CEO and the executive team. And so we weren't-- satisfied with our performance to shareholders-- to date. We also needed-- better-- clarity and communications to the marketplace. We needed better integration with the team. A better explanation of what HP stands for today.

DAVID FABER: What does that mean, the communication to the marketplace and integration with the team?

RAY LANE: Well, if-- in August if I take March, June and August as major announcements that we've made to the market on our product-to-market strategy I don't think they are clear. I think they were confusing to the market. Even though they're the right products and the right strategy. And so we used to have to have-- we-- we're so large. We're a portfolio of-- of companies, if you will. Each of these companies in HP is $20, $30 billion. One is $43 billion.

And so they're so large to say, "HP is going this way," or, "HP is going that way," is very difficult to explain if you're a PC customer or you're server customer, you're a software customer because you care about HP from that perspective. Very few customers say, "I buy HP across the board."

DAVID FABER: Was the hiring of Mr. Apotheker a mistake?

RAY LANE: Well, we get to-- you know-- Léo delivered-- a perspective about increasing the amount of software and services in this company. Remember, we are $130 billion worth of hardware. Actually, $125 billion of hardware and $4 billion of software. So we asked Mr. Apotheker to increase the content and the value add of software and services to the portfolio because if we have customers making decisions about software-- they will likely make decisions about the hardware to support that software from HP.

So we thought that content was it. But a wildly successful software business going from $4 billion to $8 billion to $12 billion will still only likely be six to eight percent of our all of HP. We care about the $125 billion more than we care about the $4 billion of software. But the $4 billion of software going to $8 going to $12 is really important to the future of HP.

So Léo delivered on some major strategies, moving the company into cloud computing, which is now live at HP. It's a very important future. Cloud is not a buzzword. It is the direction of the IT business. He delivered-- decisions around unstructured data-- to move into providing management of unstructured data which is 85 percent of the world's information.

Only 15 percent of the world's information is in relational databases, you know, in videos and e-mails and, you know, chats and-- what we're getting-- right here now is unstructured data that needs to be managed and companies are worried about the security and the management of that information. And that was a big opportunity in Autonomy re-- and Vertigo. Both of those acquisitions recommended key assets, unique assets, that nobody else has to put HP as a leader into that business.

DAVID FABER: And now, obviously, Meg, I want to talk about the strategy that continues to be endorsed by both of you that as-- Ray just pointed out was followed-- or-- engineered by Mr. Apotheker. But first-- you know, here you are a successful executive who I've known for many years, of course-- at EBay. Failed run for the governor of California. You're a very wealthy person. Why in the world after that board that you just saw with all those people who've had a very difficult time at this company—


DAVID FABER: --and in dealing with the board of directors of this company, would you want to take this job?

MEG WHITMAN: Well, first is I think we have a great board today. This is a wonderful group of people that Ray put together at the beginning of the year. And we work well together. So the board—

DAVID FABER: You really –

MEG WHITMAN: --issues.

DAVID FABER: --work well together?

MEG WHITMAN: We do. The board—

DAVID FABER: I mean you—

MEG WHITMAN: --issues—

DAVID FABER: you see all of the press out there.


DAVID FABER: And all of the conversations.


DAVID FABER: Dysfunction is probably-- if you search it you'd probably get HP board as-- as the first search on Google?

MEG WHITMAN: You know what? Over history I don't think the board has been run as effectively-- and as a team as it should be. What I can tell you is we have a great board that works very effectively together. And I don't think you're going to see future problems with the HP board would be my guess.

So why did I take the job? Well, 'cause HP matters. HP matters to Silicon Valley. HP matters to California. HP matters to the country. I would argue HP matters to the world. And I see a tremendous opportunity to restore the luster of this Silicon Valley icon. And, you know, when I was at EBay we used to look at HP because we knew we might never have been-- come into an existence in Silicon Valley had it not been for the very formative role that HP took in Silicon Valley to be really the spearhead of innovation here.

DAVID FABER: Meg, I to put it mildly, I would say that there has not been outpouring of-- of affection, so to speak, not for your personally but for your appointment. I mean even Jeff Sonnenfeld is normally one of the more positive guys, the Yale School of-- Management-- professor said, "It's not a ridiculous choice but they could have done better." What's your reaction to-- we had Tommy Sakamagi on earlier from Sanford Bernstein. Again-- a chorus that seems to say, "You don't necessarily have the qualifications that one should have to run this company."

MEG WHITMAN: Well, I'll let Ray answer from the board perspective and then I'll give you-- my point of view on that.

RAY LANE: So-- first of all-- I remember responding to-- questions 10 months ago about the changeover in the board. I put five new board members onto this board and I remember-- articles, and maybe questions from you, David, about is Léo seeding the board with his buddies. This is an independent board, a new board. Eight of the 13 board members are new since January. And these board members are CEOs of companies that are independent and not shy to make independent judgment decisions on-- any of the management decisions and especially on the CEO.

This was-- our best choice. Full stop. We looked at-- we-- we've been under consideration as a board, living together for the last couple of months. And trying to decide long-term where-- when we're in 2012, 2013 are we going to be comfortable with the leadership and the direction, the communications, the people, the team play, all the things you have to put into evaluation of a CEO. And we came to the conclusion that we needed to make a change.

DAVID FABER: Well-- can I just stop you for one second. And you-- you started this process two months ago?

RAY LANE: We started-- you know, I should say I started the process it's an evolving process. You start it by, first of all, having direct conversations. I learned the lesson at Oracle that you go talk to the coal face. You talk to people who are on the coal face.

How do they feel about the company? How do they feel about the leadership? How do they feel about the board? How do they feel about-- what are their customers saying? You have to listen closely to what they're saying and not listen to just the management team that's telling you everything is fine. Everything is going—

DAVID FABER: And so what did you hear when you—

RAY LANE: Well, I was—

DAVID FABER: --started doing that?

RAY LANE: I was hearing disturbing reports that our customers where confused about what we were doing. You know, we were announcing things. We were communicating things. And so, you know, the whole communication on the PC business with first-- the first time on that announcement was we were selling the PC business.

We have no intention of getting out of the PC business or getting out of any hardware business. We're number one in every market. Every single market. The products we have are more competitive than any of our competitors. Why would we get out of a $43 billion PC business that is number one and number one by a long margin in profitability.

But we looked at it objectively. You remember I said this board looks at things objectively. If it makes sense to spin out to shareholders and increase the value of that business because it runs at a different cadence and a different dynamic than the server business and the software business, then if others might look at HP as saying, "You know, it's worth more as parts versus the whole," we should be willing to look at ourselves that way.

So we did. So we did. And we said, "You know what? It's fair to examine whether it makes sense to spin it out so shareholders and customers actually do better." Don't get out of the PC business. Possibly call it the HP PC company. That would be my preference. But allow it to move at a different dynamic. Allow it to use other competitors' software.

DAVID FABER: You know—

RAY LANE: Whatever the customer wants.

DAVID FABER: but since we're here let's-- let's focus on this for a moment. I want to get back of course to the choice of Meg and-- and what she went through. But we're talking about that—

RAY LANE: Do you want to get back to that first? As-- I'm sorry. I took you off course.

DAVID FABER: Well, no—

RAY LANE: You want to go back?

DAVID FABER: --there's no such thing as off course or on course.


DAVID FABER: We're going where we go and that's the-- I try and actually listen to—

RAY LANE: No, I think, this—

DAVID FABER: --the answer.

RAY LANE: --is-- I think—


RAY LANE: --I think this is important. The choice of Meg is important. So this—


RAY LANE: --we'll come back. Okay.

DAVID FABER: Yeah, we will. But I mean—


DAVID FABER: --on this PC business question, I want to make sure people understand. You are still saying what was said about a month ago.

RAY LANE: Absolutely.

DAVID FABER: Namely that you are still reviewing—

RAY LANE: We're reviewing.

DAVID FABER: --what to do with the PC business.

RAY LANE: And if it—

DAVID FABER: which may result in a spinoff of an entire separate company from Hewlett Packard.

RAY LANE: And the

MEG WHITMAN: Much like what HP did with Adulent a number of years ago. That was-- that was the same exact thing.

DAVID FABER: But doesn't that create a great deal of uncertainty in the market? You are talking about the leading PC business that has 5.9 percent margins, 41 billion in sales. That isn't anybody else's business. Why create that uncertainty in the marketplace, Meg? And how are you going to deal with that when you've got to imagine the likes of Dell and everybody else coming after you every single day?

MEG WHITMAN: And it has created some uncertainty because I don't think we communicated that message as well as we might have on August 18th. And we have heard from our sales force that it has created uncertainty in the marketplace. So what we've got to do is we've got to get to the answer on this as fast as we possibly can.

We've got to be deliberate. We've got to do the analysis. But I have told the employees as well as shareholders yesterday, "We're going to get to ground on this as fast as we can and communicate it as fast as we can." You know, business people, purchasers, they can deal with lots of things. Uncertainty isn't at the top of their list.

DAVID FABER: You certainly hear that a lot.

RAY LANE: But David—


RAY LANE: this falls under the category of no good deed goes unpunished because the board-- when I go back to the board discussions, this was a very honest intent to evaluate whether it made sense for shareholders and for customers.

DAVID FABER: But where does that start then?

RAY LANE: If it doesn't—

DAVID FABER: Where did that debate start in terms of the question that was put before the board in terms of why you would even consider getting-- out-- not out of. Spinning off the PC business?

RAY LANE: Our market price was 30 percent below what the piece parts were worth. That's coming from the market. That's what the market tells us. Now it's objective data. You know, it-- it's-- how everybody votes every day. We said if there's shareholder value locked up in the PC business, our biggest division, we can unlock it without losing its synergy.

Now you—I you know, Meg feels this way. I feel this way. If this-- if we cannot demonstrate that this benefits shareholders and benefits customers, if customers would feel, "I am better-- I get better products, I'll get better speed, I'll get better choice," if-- right. We keep it?

DAVID FABER: But aren't you—

RAY LANE: Simple as—

DAVID FABER: endangering—

RAY LANE: --that.

DAVID FABER: the profitability of this very business if in fact you end up keeping it, Meg, with this interregnum that's going on, creating that uncertainty?

MEG WHITMAN: You know what? I hey, listen, I've been in business 30 years. When you make a decision and then you execute you can repair any-- concern that the marketplace has had. In the end this is all going to be about results. And we will make a decision.

If it-- if we decide to keep it inside HP we will make sure we've got the right people, we've got the right strategy and we will go 100 percent full bore. If we decide to spin is the right thing to do then we'll set it up for success. So we'll get through this and I think either way the PI-- what we call the PSG division, the PC division, will be a very successful entity.

DAVID FABER: But what the miscommunication then? That the marketplace took it as a given that this was going to happen instead of a true review?

MEG WHITMAN: Yes. I think they thought we had made the decision to spin it or to sell it.

RAY LANE: No, it was actually --

MEG WHITMAN: Or we heard from people who said, "We hear you're shutting the business down," which tells me that we didn't communicate clearly. And-- you know, we've got to take accountability for this.

DAVID FABER: When did this board know that Mr. Apotheker was no longer the person to run the company?

RAY LANE: The board or the discussion about the board? Well, I mean I would-- I would say it occurred-- a month ago. It's three weeks ago.

DAVID FABER: And-- bring me into the process, then, that resulted in Meg Whitman becoming the CEO? Many people wonder why not have embarked on a search, a very formal search. Outside candidates. Perhaps some inside candidates. Because it does appear, of course, that this was a decision that was made very, very quickly. When you looked around the room and said, "Hey, who's going to do this? Oh. She looks like she might be up to it."

RAY LANE: So we certainly-- thought about it. As we arrived at a conclusion that we needed to make a change-- we looked at our options. And the options were to go outside, again. And we-- and both Meg and I feel very strongly that CEOs in the future need to come from inside not outside.


RAY LANE: Meg, what-- because it's-- it's healthy.


RAY LANE: --developing people for the future is a healthy thing to do for this company.

MEG WHITMAN: And-- admitted, I don't think HP has done a good job on that. Look at, we've gone outside for three, four CEOs.

DAVID FABER: Carla came from—


DAVID FABER: --outside.

MEG WHITMAN: You-- yep. Mark Hurd—

DAVID FABER: Hurd came—

MEG WHITMAN: --came from—

DAVID FABER: --outside.

MEG WHITMAN: --outside. Léo came from outside.

RAY LANE: Three outsiders.

MEG WHITMAN: It's the wrong thing to do. HP has 320,000 employees in major lines of business in 65 countries. We have got to do the job on management the succession, training, development so we have a wealth of candidates that can step up into the key jobs.


MEG WHITMAN: And we've got to improve that.

DAVID FABER: she's not really inside, either. I mean-- Meg's been a board member for six months?

RAY LANE: Yeah. Eight months.

DAVID FABER: Eight months.

MEG WHITMAN: Eight months.

RAY LANE: Yeah, that's absolutely true.

MEG WHITMAN: It's a blend. It's a blend.


MEG WHITMAN: It's not a total outsider.

RAY LANE: So we—

DAVID FABER: Understood.

RAY LANE: we just thought it was wrong. And we had just done a search 10 months before. We had a lot of data on who the best candidates on the outside were so we looked at those candidates versus what options we had inside. There are a couple of executives who were coming along who I believe are candidates to be future CEO inside HP. That's the great news. They're not ready today.

You know, we're-- we have some-- we're in a crisis mode and we need to manage that crisis mode. And we needed experienced leadership. Someone who had been a CEO before or had been a CEO a couple of times before. And so as we looked around and said, "Okay, what's the right combination of someone who understands the company, who understands the problems and challenges we're facing, who can take businesses that are still number one in their markets--" across the board we're number one in e-- you know, servers, storage. We're number on in PCs.

You know, we can take that business and take it forward and get the people energized around the value of HP. That-- you know, the-- the company that was once great is to-- to get them energized. The choice became easy. Two time CEO. Sitting on the board. Understands all of the decisions we've made in the last year. Understands the people of HP. There was not an outside candidate that could compete—

DAVID FABER: Doesn't have

RAY LANE: with Meg.

DAVID FABER: a lot of experience


DAVID FABER: in the enterprise software

RAY LANE: Yeah, it be—

DAVID FABER: business. No one has really-- very few people have run an organization with 320,000—

RAY LANE: You know—

DAVID FABER: employees but, you know, people would say Meg's skill set not exactly aligned.

RAY LANE: David, Ronald Reagan was an actor. He was a pretty good president. Okay? I knew nothing about software. I mean-- you probably wrote some of these headlines, but when I came to Oracle I was given six months because I was a consultant coming in to a great sales force-- at Oracle to run the-- the sales organization and run Oracle USA. Lou Gersner was a consultant when he went into IBM.

So, you know, leaders are leaders. Meg is a leader. She's a proven leader. She's a proven-- leader of people. To bring people together. To point them in one direction. To communicate clearly. And-- and I've been with her on customer-- in customer situations. She can make-- an enterprise sales call better than I can.

DAVID FABER: And-- I assume from what you're saying, Léo Apotheker perhaps did not have those leadership qualities that this board apparently thought he did when they hired him less than a year ago?

RAY LANE: You know, Léo-- I've known Léo for a long time. He's got great qualities. Not the qualities that are needed right now here and now. Operate-- deep operations experience. Execution in our quarters to deliver the numbers that we promised to shareholders. Clear communication skills. Making it very clear.

That August 18th announcement that we made should have been clearer. Should-- they-- there should have been an understanding right from the beginning. The understanding you're getting right now that we are going to evaluate the spin out only for the benefit of investors and-- and customers of PSG. If it doesn't have those benefits we keep it. That would have been really easy to communicate on day one.

DAVID FABER: And it was not—

RAY LANE: It wasn't.

DAVID FABER: --it was not done right. We want to take a commercial break. I want to talk a lot more of course about strategy and, in particular, why the company continues to endorse the strategy that was laid out-- by the previous CEO when we come back with Ray Lane, executive chairman of Hewlett Packard, and new CEO, Meg Whitman.


DAVID FABER: I'm David Faber joined by Ray Lane, executive chairman of Hewlett Packard, and new CEO, appointed yesterday, Meg Whitman. Meg, the strategy that was laid out by the-- by your-- successor, or I should say the-- person you're succeeding, excuse me, is being maintained. And it's a strategy that seems to have changed from March, to a certain extent. OS2 was something that endorsed. Then it seemed to have been more or less thrown aside. The—


DAVID FABER: the tablet—


DAVID FABER: Web OS. Excuse me. The tablet. A number of other—

MEG WHITMAN: There's Web OS obviously the systems. You know, the operating system. And then there's Web OS tablets—


MEG WHITMAN: --and devices.

DAVID FABER: My question is why endorse a strategy on day one-- granted you've been at the board of directors, that many people were questioning and that obviously was being pursued by a gentleman who the board didn't ultimately believe in?

MEG WHITMAN: So the strategy of HP is around being the largest single best technology company to provide solutions for companies and individuals around the world. That has not changed. We are a very big, diversified global company. The actions that were taken on August 18th were the beginning of some changes that we still want to make to HP.

We are, first and foremost, a hardware company. That is where we make our money. That is the heritage of this company. But Ray said it well. We need to evolve to new areas like unstructured data. The reason Autonomy is there right thing to do, this is a fast, high growth area. Eighty-five of data now is unstructured data. Autonomy has the very best product. We can take that part, leverage our distribution system and leverage that for hardware sales—

DAVID FABER: And it's a large—

MEG WHITMAN: --as well.

DAVID FABER: --deal, no doubt. And actually as a percentage of your overall market cap a much larger deal than it was—

MEG WHITMAN: Absolutely.

DAVID FABER: --when you pursued it.

MEG WHITMAN: Absolutely.

DAVID FABER: But nonetheless it, revenue-wise, is not a particularly large company—

MEG WHITMAN: No, but we have—

DAVID FABER: and you're—


DAVID FABER: paying a very big price.

MEG WHITMAN: And we could talk about the price, but we have to start to evolving in that direction. At the same time we've got to continue to grow our hardware business, grow our services business. So that's the first action that was taken. And I agree with Autonomy. I'm excited about this acquisition. I think this is going to pay big dividends—

DAVID FABER: Why do you—


DAVID FABER: believe that?

MEG WHITMAN: employees and shareholders. I've met Mike Lynch. I understand the product. I, by the way, know a lot about unstructured data. EBay was nothing but unstructured data. And so know about Autonomy and this product. So I'm excited about it. The sales team is excited about it. Our customers are excited about Autonomy.

DAVID FABER: You paid a very big price, though? I mean Ray—

MEG WHITMAN: You know what?

DAVID FABER: that was a very high multiple, ultimately. It-- it didn't appear that there were any other—

RAY LANE: It was.

DAVID FABER: potential buyers for this corporation.


DAVID FABER: Some wonder why.

RAY LANE: if you could have figured out how to pay less I would have-- I would have taken the recommendation. I-- you know, it was the market price of what-- it's what it took to get the co—

DAVID FABER: Well, I guess it-- it was your feeling it was a necessity is the question. Why was it a necessity?

RAY LANE: It was a unique property. No one else manages unstructured data like Autonomy. No one has a lead market position like they have. And if you have a lead market position and it's quite unique, you can command-- a very high price. There are synergies inside HP. Mike Lynch believes this so much that if you look at our software portfolio and our hardware portfolio that are major synergies that can be gained and you can grow Autonomy much faster than it's grown inside of HP than outside of HP. On the price, you know-- the price demands that we get the synergies. So we have to—


RAY LANE: grow the-- the business very, very fast. I remember the criticism a year ago, I wasn't around, Meg wasn't around, on the acquisition of Three Par. Mark Hurd had left. It was done by Dave Donatelli who—


RAY LANE: runs our largest, you know, enterprise business. We paid a high price for that. Dell was willing to pay slightly under that, so we just—

DAVID FABER: Yeah, that was—

RAY LANE: outbid them.

DAVID FABER: one of the greatest bidding wars we've seen—

RAY LANE: Yeah, well—

DAVID FABER: in terms of at least—

RAY LANE: everybody says, "Well, they overpaid." You know, all of a sudden Michael Dell said, "Well, they paid too much." Well, he was willing to pay almost as much. The reason is it was a unique property. Now a year later we can go back and look at its performance. It has outperformed the synergies and outperformed their expectations and the requirements that we had for that business to be accretive. So-- our track record so far in Three Par is-- says if we do the same thing, just the same thing with Autonomy, this is a great acquisition.

MEG WHITMAN: Exactly. I mean our job now is to execute. And the sales team is poised to execute. The leadership team is poised to execute. And we're going to have to be measured on how big a company Autonomy becomes within HP. And I'm enthusiastic.

DAVID FABER: Meg, why not have taken a little time-- and now, granted, I know you-- again, you've been on the board.


DAVID FABER: It's not as though you're a stranger to these matters. You endorsed the strategy that was pursued—


DAVID FABER: by Mr. Apotheker. But nonetheless, why not have taken some time and said, "You know what? I'm going to think about certain things, here instead of immediately coming out and more or less endorsing what's already been in place?

MEG WHITMAN: Well, it-- listen, I was in the board when we took these strategic decisions. And, obviously, over time, over the next six months to eight months to a year obviously as a CEO I will look at what we're doing. I will make some different decisions, perhaps. I will, you know, look going forward.

But from what I know now, from where I sit, these seem like smart decisions. We have to execute against those decisions and then see what other opportunities, see what fine tuning we want to make. And I will do that as the CEO. I'm not just taking the play book and, you know, turning to chapter one, line seven. But I feel comfortable with the strategic direction of the country. I feel comfortable with the Autonomy acquisition. We will decide about PSG quite soon.

DAVID FABER: What does quite—

MEG WHITMAN: And then—

DAVID FABER: soon mean? I mean how—


DAVID FABER: you know, in your mind how quickly do you—

MEG WHITMAN: what we—

DAVID FABER: need to—

MEG WHITMAN: have said—

DAVID FABER: get this.

MEG WHITMAN: is before the end of the year. I want to accelerate that.


MEG WHITMAN: I'd like to accelerate that dramatically if we can.

DAVID FABER: Dramatically—


DAVID FABER: meaning in a couple of-- I mean we're-- it's already almost the end of September, so—

MEG WHITMAN: You know-- we're meeting next week to understand where the, you know, team is that is evaluating this. I want to move fast but I don't want to make a mistake. So I want to be deliberative. I want to do the analysis. But I think we can-- we can condense that—

RAY LANE: There're a lot of pep—

MEG WHITMAN: timeframe.

RAY LANE: there's a lot of people working on this. And of the four decisions we announced, Autonomy, PSG, Web OS, the operating system, and Web OS devices, two different decisions, two of those decisions were made. Two of those decisions are evaluation that Meg now gets to make the decision on. So two of these things she has to get the information, the data, to make this decision in the next four months.

DAVID FABER: What-- what is your-- now day one, full day here, what's your first priority at this company?

MEG WHITMAN: First priority is to make the fourth quarter revenue and EPS targets. You know, we're facing some economic headwinds. We-- we've got to make this quarter. And, you know, there's only six weeks left in the quarter. I'm the new CEO. But we got to galvanize people to make sure we deliver on our promises. Number two is we got to-- I got to make sure Autonomy is on track to be integrated so that we can make it a fabulous addition to the HP-- organization.

DAVID FABER: Is this quarter already, I mean, kind of baked though? You really can make—


DAVID FABER: a difference you think in the next—

MEG WHITMAN: Well, I-- no. You're halfway through the quarter. And sales come in-- in these different businesses software is famously back end loaded. As Les-- Ray can tell you. And so, you know, we've got to-- this is-- one of the great strengths of HP is their field organization. Thousands and thousands of salespeople in different businesses across the world. And we've got to, you know, make sure they're motivated and they're excited with a new leader, a new board to deliver that—

DAVID FABER: How much—

MEG WHITMAN: quarter.

DAVID FABER: do you lose-- you know, given that-- the turmoil, frankly, in the leadership ranks?

MEG WHITMAN: It-- you know what?

DAVID FABER: How much does that distract people?

MEG WHITMAN: I think Thursday, the day that all the rumors were out there, I bet there was a lot of water cooler conversation. I've been in big organizations. How many calls do you think got done that day? Probably not too many. But we did a lot of communication yesterday. I'll continue to communicate next week.

I think people are back to work. I think they're excited. You know, this organization, David, has been through a lot. And I'm-- you know, we've got to win over hearts and minds. And it's hard because, gosh, if I was HP I'd be like, "You know, we've been through a lot here." But I think—

DAVID FABER: That's saying-- that's saying the least. I mean it is


DAVID FABER: you know, how—

MEG WHITMAN: It is absolutely. So you know what? Yesterday we were off to a good start but we've got a lot of work to win over hearts and minds. But what I will tell you is HP people love this company. We have many very long tenured employees who love this company. And I-- I believe they're going to rally.

DAVID FABER: I want to take another break and then we'll join-- we will continue our conversation with Meg Whitman and Ray Lane right after this.


DAVID FABER: One stock that has had a rough go at it is hp the stock down about 45% over the last lets call it 11-12 months ray. That’s got to hurt employees in addition to many of your investors. When they look at this company and they wonder what's going on. And they use the world dysfunction, despite, of course, you're arguments to the contrary. You know, how do you get people back on board, both from an investing standpoint-- and as well bring morale up when people are losing money all over the pace?

RAY LANE: I think it starts with employees. It-- its-- and we have-- we have a lot of important constituents. Investors, customers, employees. Employees are the most important constituent. We have 320,000 employees and that's-- a real advantage when you make change. If they don't like that change it becomes a real disadvantage.

Remember what I said earlier about going to the coal face. Salesmen that talk to customers. Developers of products that might go somewhere else. If those-- if those 320,000 people believe in Meg, believe in where she wants to take them, believe that she is going to support them, believe that she is enabling them to carry out their mission, whether it's development of a product or making their number in a quarter, if they believe in her, 320,000 people will turn around like that. If they don't believe in her it will continue to be


RAY LANE: that—

DAVID FABER: come back to this idea of leadership, essentially. I mean--

RAY LANE: Absolutely.

DAVID FABER: forget the fact that she may not-- be able to write code, but at the end of the day it-- it ends up-- I don't-- maybe you can, by the way. But—

MEG WHITMAN: I couldn't write code when I ran EBay either, so no, I think the number one thing that HP needs is leadership. Leadership, a focus on strategy, executioner excellence and communication. And if we can get that right, the sky is the limit for this company. We have some of the most talented people I have ever met in technology. This is a company that has tremendous potential but we've got to enlist people.

RAY LANE: You know, and the other thing—

MEG WHITMAN: I'll make one other observation—

DAVID FABER: Yeah, of course. Go ahead.

MEG WHITMAN: from over my years in business. You know when people are happiest? Is when they're on a winning team. If they understand the mission, they're on a winning team and the company is doing well, then that feeds on itself.

DAVID FABER: No doubt. As does a rising stock price instead of, of course—

MEG WHITMAN: Absolutely.

DAVID FABER: a falling one because it is the rep