Hewlett-Packard's (HPQ) Presents at Barclays Global Technology Conference Transcript

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Hewlett-Packard Company (NYSE:HPQ) Barclays Global Technology Conference December 10, 2014 3:45 PM ET

Executives

Cathie Lesjak - Chief Financial Officer

Analysts

Ben Reitzes - Barclays Capital

Question-and-Answer Session

Q - Ben Reitzes

All right, great. All right, everybody. Well, this is our last keynote of the conference, before we get into the home stretch. And I'm delighted to have the CFO of Hewlett-Packard, Cathie Lesjak.

This has got to be multiple keynotes we've done together. So I'm so excited to have you, and there's an exciting time going on at the company.

Cathie Lesjak

It is. Also Ben, but to speak of that, I've been the CFO now for eight years. I think that's pretty amazing.

Ben Reitzes

I remember the day you got that job. I think there's a Safe Harbor slide we need to put up. Do we need to read any of this?

Cathie Lesjak

Just point people to the forward-looking statements and the Safe Harbor...

Ben Reitzes

Great.

Cathie Lesjak

That will be good enough.

Ben Reitzes

So a lot to talk about, and I appreciate it again, the opportunity to question you. Right now the big thing going on at Hewlett is the split of the company. You weren't ready to do this under the prior CEO, and you guys said you were evaluating and then pulled back. And now you're ready to do it.

But – so obviously a lot of things have changed. Why are you ready now? And why can the company withstand this kind of situation and come out on the better end of it this time?

Cathie Lesjak

Yes. So Ben, we have spent the last three years really focused on kind of improving the company. And as a result of a lot of different actions that we've taken, we've increased our credibility with our customers, with our channel partners, with our employees.

Our employee engagement scores are up pretty significantly over the last three years, and as well with our investors. And that's really on the back of, I think, really strong financial performance.

Getting back to being a strong cash generator is a really – was a really important data point for us. It's allowed us to significantly improve our balance sheet. And frankly it's also the restructuring and the focus on cost, has also then allowed us to plow money back into R&D.

And so if you actually look at 2014, R&D is up 10% year-over-ear. Well what does that do for us? Now we've got a great lineup of products right now and we've got an innovation pipeline that's still to come, that we're very excited about. That enables us to really be in a much stronger position to talk about a split.

The other thing that's really changed and it's less about us specifically, and more just about the markets that we play in, is that technology – the pace of change in technology has increased very significantly, especially in the enterprise space. So the benefit of being more focused, more nimble, able to really address customer needs is huge.

So now we're doing the split. And we're doing – the split's a little bit different, right. We're not talking about just spinning off PCs. We are splitting this company into two strong Fortune 50 companies that are going to be able to address customer needs very effectively, accelerate kind of a competitiveness in the market and frankly deliver much more shareholder value over time for our shareholders. So we're very excited about this opportunity.

Ben Reitzes

And last time, even when it was breathed a word that you might do it, there was quite a bit of disruption and this time we haven't seen any disruption. Even at this conference, your partners are saying there's no disruption. You're saying it. Why no disruption this time?

Cathie Lesjak

I think it makes a huge difference when you announce the intention to look at strategic opportunities, specifically just for the PC business. And you're doing that at a point in time where you're just not delivering. You're not executing well, which is what the situation was 3 years ago.

And our competitors took advantage of that. They came in and they basically disrupted with customers and with channel partners, because we were in a weakened condition. We're not anymore.

This is being done from a position of strength. We also did a fabulous job, if I do say so myself, on the communication. I mean, that's really a tribute to our communications department.

We reached out to thousands of customers and partners in the first day, and throughout the first next couple of weeks, and basically the feedback we got, you heard it from distributors in large [ph]. The feedback we got was this is the right thing to do. We're excited about this. We understand that this is good for us. And so I think that that also takes away some of the risk around disruption.

And the other disruption, which there is always going to be a little disruption; we think it's quite manageable. And that we're setting ourselves up in this execution to manage that by having the bulk of the company focused heads down on delivering the fiscal 2015 results. And then a small group of people, every day they come in, all they think about is how to split the two companies and get it done by early next year.

Ben Reitzes

And with the feedback we're also getting is you're able to still bundle the products and sell them the way they were sold in the past. So…

Cathie Lesjak

Yes, there shouldn't be any change to our go-to-market.

Ben Reitzes

Now, I want to talk about HP Enterprise and then HP Inc. HP Enterprise is going to be a cash heavy enterprise.

Cathie Lesjak

You make that sound like a bad thing.

Ben Reitzes

No. I don't. And to that end, there is obviously potential room there for the enterprise company to make acquisitions. So I was wondering if you could specify what the kind of net cash position it will have, but then also what they're going to do with the cash?

Cathie Lesjak

So we don't have a final number to disclose in terms of the net cash or the capital structure. But broadly, the other reason why this split really works is that we've got between printers and PCs, and then what we call Enterprise Co, we've got really distinctly different businesses.

If you look at the printer and PC side of the house, it's a more mature market, not a lot of growth there, but a lot of cash flow generation. And so setting that company up with kind of a focus of returning cash to shareholders through the cash generation and having the appropriate capital structure, which will have more debt in it, is the right thing to do. They will do some M&A as well, but we don't think as much.

On the enterprise co side, the debt that the enterprise co is going to have – is going to be predominantly the debt associated with our financing business. And it's appropriate, to get the right returns you've really got to leverage your financing business, and we do. We lever it basically seven parts debt, one part equity. We'll continue to do that on a go-forward basis. And then the, I guess I would call the operating company at the enterprise co level will be largely just cash.

Ben Reitzes

Yes. Net cash excluding the debt from financing. And so…

Cathie Lesjak

Right.

Ben Reitzes

That brings us into the M&A question. You guys have talked about return base – returns-based M&A, and it seems like it focuses on that half potentially, even over the next year before the split. What – I guess broadly, what is the company considering and the parameters again, if you don't mind recapping?

Cathie Lesjak

Sure. I will definitely go there. But before we do that, I think it's important that both companies are also going to return cash to shareholders. So it's not as if the enterprise company is not going to pay dividends and have share repurchase. It's just going to have a little bit more M&A maybe than the HP Inc. side of the house.

Ben Reitzes

Great. Thanks for clarifying.

Cathie Lesjak

From an M&A perspective, when we look at the assets that we have today, we're pretty pleased with the portfolio that we have, especially with a lot of the incremental investments that we've made from an R&D perspective. But we are in a high-tech business and therefore there probably are going to be opportunities for us to augment our portfolio with inorganic plays. So you will see us do that.

And we will be more active in M&A in the next 3 years than we have been in the last, because we were really focused on rebuilding our balance sheet. And we've now got it to a very strong position.

In terms of kind of where we would make some of our M&A choices, I mean, it's obvious that we would do them in our strategic areas. Our strategic areas include things like cloud, big data, security, kind of new style of IT, something that is going to help propel us to market faster, to get to our customers, solutions to solve their problems. And so we're looking at a variety of things in that space.

Lots of people ask me the question, what does returns-based mean? So let me give you just a real brief overview of that. We do a full DCF analysis on all of our potential acquisitions. We adjust the discount rate for risk and then we look at it, basically on an NPV.

But it's not just the NPV and whether or not it's going to return good – give good returns to shareholders. It's also then compared to other alternatives, other alternatives that compete for capital, share repurchase being one of them. And so we look at the combination and the comparison of cost to make sure that we're making the investments that are going to drive the most shareholder value.

Ben Reitzes

Great. And you previously you've talked about big data, cloud; those kinds of things. Do you still feel like that's the areas, or do you think it can extend into anything higher margin, hardware or even services?

Cathie Lesjak

So I think it can extend across our portfolio in the strategic areas of importance. And when you talk about cloud, big data, security, you're not really talking about just our software segment or our hardware segment, because there's ramifications for big data and security and cloud in our services space as well. And so we would look at acquisitions that would kind of broadly enhance our position in those areas.

But we would also look at areas around kind of software defined, data center. So it's not just about - it's not about hardware, it’s about software that you add to the hardware that differentiates that. Those are all the types of things that you could see us look at.

Ben Reitzes

I wanted to talk about cash flow. I don't think anybody expects you to keep the pace that you've had the last couple years going. And obviously you've guided to free cash flow in the $6.5 billion plus range over the next year.

So we are looking at several - a few day’s contraction or expansion in the cash conversion cycle. So what is the primary driver there? And what could break, maybe if there is anything that could break right, so that you're being too conservative?

Cathie Lesjak

I think there's always something that can break right. And I think we typically are considered conservative. But in terms of cash flow, probably the single biggest impact to cash flow, relative to the year that just completed, is the fact that we ended fiscal 2014 with a cash conversion cycle of just 4 days at the end of Q4.

And while I couldn't be prouder of how the organization has really kind of welcomed in and focused on cash flow, and I think that will continue. I don't think that 4 days maximizes the value for the shareholders.

I think really, at the end of the day, there's some obvious that change the 4 days and bring it up, things like business mix, things like we've got some foreign exchange benefit, which really doesn't affect cash flow, but changes the metric a bit. You've got linearity around purchasing and sales that impact it.

So if I were to say what is more sustainable, it's probably 10 to 12 days and it's because of some of those things I just mentioned. But it's also the fact that now that the balance sheet is in such good shape, we have the opportunity to use it, to use it to generate value for our shareholders.

And when I think about that, its things like putting more inventory on boats, the cost savings to put inventory on boats, inventory that is already committed. The customer is going to buy it. There's no risk of obsolescence. It's just a lower logistics cost. That has a fabulous return. We want to be able to do that and continue to do that in a big way. We also want to take advantage of strategic buys.

With our fiscal years being not a calendar fiscal year, there are often opportunities where our suppliers are basically saying, we will give you a really good deal if you buy at the end of June, at the end of December.

And so we look at that, and we take advantage of those. We've used our balance sheet to do that. And that of course is going to add inventory. Paying a bit faster, if we can get good cash discounts means that we can have a bit higher DPO.

Ben Reitzes

Just for clarification for the group, meaning you could increase the pre-buys mainly for the PC unit?

Cathie Lesjak

Yes, that's typically where we see most of the pre-buys. We have a little in the industry standard servers. But most of it is in PCs.

Ben Reitzes

DRAM, HDDs?

Cathie Lesjak

You name it, we look at all of them and we look at what the return will be. In terms of putting inventory on boats, that's PCs, that's printers and to a much lesser extent, it's enterprise group.

Ben Reitzes

Okay. All right. I know people are going to want to know which ones you want to pre-buy, which sectors. So…

Cathie Lesjak

Exactly. Who's making the deals with us?

Ben Reitzes

Yes, who's making the deal? Anyway, why don't we talk a little bit about the PC market? One of the things you didn't mention in the cash conversion cycle is perhaps there could be a deceleration in the PC market. PCs obviously have a negative cash conversion cycle for you.

Cathie Lesjak

They do, significantly…

Ben Reitzes

So when they beat, you generally beat cash flow in the history of the company. So one of the concerns out there is the PC market is really going to decelerate. And some of the companies we've seen here actually are saying, yes. It decelerates, but it's not a disaster. Where do you guys come out on where the PC market should be?

Cathie Lesjak

First off, I think it's important to note the progress that we've made in our personal systems group. If you look at basically fiscal 2014 in Q4, we did some – we proved to a lot of people, external people as well as frankly internal people, that you can do three things. You can grow revenue, you can grow profits and you can grow market share.

And that is a very important point. And that is what Dion is all about. He's not out there for share for share sake. He's not out there for growth for growth sake. He's actually interested in growing top line, bottom line and share.

Now we did benefit a bit in fiscal 2014 as a result of the XP migration. But we also outperformed the market every quarter by leveraging our scale, our brand, and frankly a great product lineup. And so we still are very excited about the product lineup in PCs. We think there are still opportunities to grow.

One of the things that Dion has really brought kind of the mentality to the organization as well as some of the methodology, is segmenting the market. His team does a fabulous job of determining in all of the different markets they play in across the world, where are the places that Dion says that the heat is in the market, where there's an opportunity to grow and grow profitably.

And there are growth areas in PCs. You've got convertibles, commercial mobility. We're doing great in mobile workstations. There's Beyond the Box. There's Internet of Things. There is all areas like that that really provide some opportunity for growth. And I know that Dion is focused on doing that in a profitable way.

The market is tough. It's very competitive. It's contracting. But there's still opportunity for us to take advantage of the position that we have, and also the fact that the market is consolidating.

Ben Reitzes

Yes. You said that on your latest call. You do expect it to contract by a few points. There is some argument about that to which the pace is and whether, some folks are at flat. Okay. Well, a few points I think is well within the bounds of expectations.

I wanted to ask you about imaging. Since we last talked the yen is getting even weaker, and you've been benefiting there on the margin side. The margins have been spectacular in that division.

But within the context of foreign exchange as a whole, heading into FY 2015, the euro is ahead [ph]. So I wanted to ask you in imaging, can the margins stay so great and be pretty stable type situation up at this 18 range?

Cathie Lesjak

So we have obviously had a nice tailwind from yen in fiscal 2014. We do, if you look at the yen, we expect there's an incremental, you know, another opportunity if rates stay at roughly where they are today. Yen, dollar and yen, euro to continue to have a bit of a tailwind. Now, not as large as we had in 2015, I am sorry, in 2014, but we would continue to have one in 2015.

But it's not just currency that's kind of happening in the IPG space. It's also this maniacal focus that Dion has on cost, and making sure that we've got the right cost structure, and taking both some the kind of yen benefits, as well as the cost structure benefits to place more units.

In some cases be incrementally more competitive on price, and drop some of it to the bottom line. And you saw that in 2014 and we're focused on doing the same thing in 2015.

Ben Reitzes

That's good. And then looking at FX as a whole, you know the euro, Europe's a huge region. It's about 36% of sales. So do we think of the euro as a major headwind though, going into the year? And how much did that haircut your guidance?

Cathie Lesjak

So euro is definitely - currency broadly, except for the yen, is a headwind for us from a top line perspective and some of that will clearly be a headwind on the bottom line. And it was not completely, but largely factored into the guidance at the time.

The euro has gotten a bit weaker since we guided the full year at 3.83 to 4.03. But we think that with all of the actions that we've been taking around our cost structure that we can operate within the guidance that we provided.

Ben Reitzes

Well, you've got the yen moving your way though.

Cathie Lesjak

We've got the yen moving our way.

Ben Reitzes

Are you doing price harmonization’s as well, behind the scenes and all the…

Cathie Lesjak

So every business in HP hedges a little bit differently. And the reason for that is that every business has a different set of competitors, and frankly a different opportunity over time to price for some of the currency.

So in a business that really doesn't have that opportunity to reprice, we hedge much longer. Enterprise services is a good example, although enterprise services does have the benefit of having a more natural hedge. But those would be longer term, because the contracts are long-term and the opportunity to reprice isn't there.

If you go at the other end of the spectrum, PCs tend to adjust fairly quickly. And so the hedging timeframe for that is shorter. And we've adjusted, set it all up, so that we can minimize the bottom line impact of currency.

Ben Reitzes

You recently announced two products that look pretty cool. I mean, I wasn't expecting much and I thought 3D Print [ph] was very good. I really did. I was like trying to figure out how much I should push it. How much should I push it?

Cathie Lesjak

Well, I think its huge opportunity for us. But just so everyone doesn't go out there and get really excited about it, too soon. We've announced the technology. Products yet to come, but I think what's key, and it was very important to us before we kind of took that step into 3D, and it's mostly on the commercial side is where our interest is, is to make sure that we could do it at a reasonable cost, reasonable quality and in a reasonable time.

And by basically solving those three problems with 3D print, we think it's a huge opportunity for us. And our technology does that.

Ben Reitzes

But in 2016?

Cathie Lesjak

I think in 2016 that you'll definitely see some impetus from 3D print.

Ben Reitzes

Okay, great. Well, what about in-servers moving to the enterprise? There is a potential, Windows-related cycle over the next 12 months and ISS sort of drives the bus for HP. Back in the day, we could call ISS, right. We could call even the whole stock, right, because it pulls through storage. It pulls through services and your maintenance and tech services.

So can we rev this up? Last quarter you're down 2%, I believe, in ISS. And that was one of the concerns we had from the quarter, amongst some pretty solid execution. So how's that shaping up?

Cathie Lesjak

So let's talk briefly about Q4, because while Q4 as reported was down 2%, if you adjust for the very large deal, Hyperscale deal that we won and shipped the previous fourth quarter, the industry standard servers was actually up high single digits. So we're very excited about the momentum that we've got in ISS.

And in the fourth quarter Gen9 didn't have a huge impact. But we have now announced Gen9 ProLiant and we are shipping it. What comes with Gen9 is it's frankly innovation that's really focused kind of business outcomes, not really just feeds and speeds. But what also comes from it was a very rich configuration. And so the attach that we're getting on our server – Gen9 Servers is great. So we're very excited about this opportunity. And it couldn't come at a better time.

When you talk about the Windows2003 expiration, we see that as a tailwind. We think it ramps through 2015. We think it's worth millions of servers that will come up. And we're working very closely with Microsoft, which has stood us in good stead in the past, when we did exactly the same things with the XP migration. And so we're excited about that opportunity.

Now the only caveat and I don't want to put too much cold water on this, I do think it's important. When you sit back and you model what the opportunity could be for the 2003 expiration, make sure you take into consideration, as we have done, the fact that it isn't going to be a one-for-one exchange on servers. Both because some of the older servers are going to be replaced with the newer and more powerful servers, plus there's the shift to cloud.

And then finally, not everyone will upgrade their hardware at the same time that they upgrade their software. There can be software only upgrades. And we saw the same exact thing with the XP migration in the PC space. But we still think that with all of that, there are still millions of servers that are going to come up. And we have the right platform with Gen9.

Ben Reitzes

Yes. That's good to hear that confidence. I mean, the XP thing in PCs was supposed to be nothing…

Cathie Lesjak

Yes.

Ben Reitzes

And every PC stock went up a ton in the last year and a half…

Cathie Lesjak

But it took time. It didn't…

Ben Reitzes

Yes.

Cathie Lesjak

It didn't happen as quickly as we had originally anticipated it. So I do think that it does this Windows 2003 expiration, it's probably over the course of 2015. It's not like Q1 is going to be kind of the height of it.

Ben Reitzes

So if that takes off, that will be good, because it will drive tech services, your maintenance division. And I wanted to kind of talk about your aspects of services, where you feel you are.

Last quarter, moving into the services division, there's obviously two types. You have maintenance and then you have the HP services.

Cathie Lesjak

Right.

Ben Reitzes

How do you feel about both of those? And one is, a lot of it is the former EDS?

Cathie Lesjak

Right. So on the tech services, which is not the former EDS, it's around maintenance and break fix, as well as different types of broad services that we provide to data centers, proactive care, foundation care, kind of full out data center care.

And I would say we're very pleased with how that business has been run. Meg has frequently said she thinks it's maybe one of the best run businesses at HP, because it has been under a ton of pressure with kind of hardware decline in previous years, which is where it gets obviously a lot of its revenue.

But it has diversified by offering these other types of services, as well as looking at very strategic places to do consulting. And the margins on that business have really maintained or increased, depending on which quarter you look at. And it is a very lucrative piece of business for us.

We're excited about looking at fiscal 2015, and the opportunities that exist in 3PAR and we've got lots of great new announcement around 3PAR. We're excited about that portfolio.

Networking has grown, I don't know, umpteen billion quarters in a row. We're excited about that and then with the Gen9. So that all gives a tailwind to tech services and we do expect that tech services from a top line perspective starts to stabilize in 2015.

From an enterprises services perspective, which is largely the former EDS, we are starting to see what we call green shoots in that business. If you look at Q4, some of the key determination around kind of the future is what does the quality of the bookings look like?

And the quality of the bookings there's kind of three big factors. The first one is, what kind of new logos are you getting? Are you getting a lot of new logos and what is the quality of those new logos? What does the add-on business look like in the existing accounts?

And then finally what – how are we attaching strategic enterprise services, so cloud, big data, information management to the findings that we're getting. And Q4 was a very strong quarter. If you look at new logos in SEC, I am sorry, SES, we were very pleased with the performance. Their new logo is TCD, the highest that we've seen in Q4 in over 3 years.

So really strong indicators that the sales transformation is working, that we've got the right products, kind of the services offerings to address the market. And then on top of that we've done a nice job of restructuring and getting our cost structure in line, more work to do and then also improving our underperforming accounts.

Ben Reitzes

I don't want to put you in a box. But there's been a few restructurings that the restructuring was initially, I kind of forgot where the numbers started, but it was 25,000 jobs or so and it's just escalated up to as much as 55,000…

Cathie Lesjak

It has 55,000 by the end of 2015.

Ben Reitzes

Are we done? Is it, you know, do we feel like the green shoots mean you're in the right place now?

Cathie Lesjak

I think there's more opportunity. So when you think about that 55,000, many of those are in kind of these tougher, more complex countries. And that will benefit ES and applied services. And then you also then need to step back. And it's not just a comment about enterprise services specifically, but you step back and you start looking at the split.

And we think there are opportunities – there's typically opportunities here and we agree that we think there are opportunities to further kind of restructure. Exactly what that's going to look like, you and I talked before. There's still more work to do. So that, exactly what that could look like.

Ben Reitzes

To be clear, it's not necessarily clear if its heads related. It could just be…

Cathie Lesjak

It could – it's probably a combination of things. I mean, if you think about, you've got to do a lot of real estate splits and then consolidations. And what the ramifications are of that. There are ramifications from an infrastructure perspective. And so we do think there are going to be some opportunities.

Ben Reitzes

What do you think the state of your cloud business, meaning you're a competitor for Amazon, web services, your competitor for IBM SoftLayer. Where are we? Do you have invested what you need to? You just made the Eucalyptus acquisition. So where are we there, and what should we expect going forward?

Cathie Lesjak

What we saw in 2014, fiscal 2014, was that kind of total HP cloud revenue grew double-digits. And so we're making good progress. But we are continuing to invest very significantly in that business…

Ben Reitzes

Double-digits meaning that's the infrastructure as a service business?

Cathie Lesjak

And what we broadly call HP cloud that includes our infrastructure as a service, yes.

Ben Reitzes

Okay.

Cathie Lesjak

Up double-digits. We announced in fiscal 2014 our Helion hybrid cloud environment built on OpenStack. So it's open and secure, not tied to proprietary structure. And that is resonation very well with customers.

I was actually at a customer event in early November and I overheard one of the customers talking about the fact that she, she was a CIO, and she said she really liked the fact that you can go to the public cloud and do Dev tests. But she's really frustrated by the fact that when they decided that they actually then want to bring that into production, they have to do all kinds of work to bring it into their environment.

With hybrid cloud and our Helion platform, we've got the same architecture, whether you're in a private cloud, a managed or a virtual private environment, or our public cloud. So that allows people to do Dev tests on the same architecture, and then immediately when they're ready, bring it into production on the same architecture. And so we don't really view ourselves as head-on competing with an Amazon. We are –our value proposition is this hybrid structure with the open environment.

So we're investing cloud in that space. We're also heavily investing on OpenStack. We are the number one contributor on the latest release. We are building up the services that customers desperately need around cloud and OpenStack in order to set up their environment. And we're seeing frankly just good response in that space.

Ben Reitzes

Could that be an area of tuck-in acquisitions? More of the Eucalyptus type, or do you have the right platform now…

Cathie Lesjak

So I definitely think that there are potential acquisitions, as I talked about broader – across all of our strategic areas and cloud is absolutely one of them.

Ben Reitzes

And then just lastly on the software side, you're seeing some up tick in your SaaS business, but where are we in terms of where you want to be on the software side? My former buddy in IR is now leading the finance I guess. So I guess, what's he looking at?

Cathie Lesjak

He's looking at everything. So we are - we would say we're making progress on the SaaS side. If you look at Q4, our kind of percentage of SaaS revenue is about 8% of our revenue compared to 36% in traditional license.

We have been growing that business about 5% on a full year basis. And our bookings are up strong double-digits, largely in IT management and security. We have now announced our Service Anywhere product, which is just SaaS offering around service management. It allows us to compete much more effectively against ServiceNow.

So we are making those investments. There is more work to do. We want to be sensitive and responsive to customers. So if the customers want to buy a license, we want to sell them a license. If they want to go with more of a subscription or SaaS model, we're okay with that as well.

That does put a little bit of a headwind sometimes on the top line, but we're managing it. But there is still more we need to do to pivot our portfolio to SaaS and subscription and we're focused on doing that.

Ben Reitzes

I want to conclude with just a big picture perspective. You generated well over $4 a share in free cash flow last year. We could argue how conservative your guidance is for this year. But stock's trading at only $38 for a company that can generate potentially $4 a share in cash for quite some time, even though you've guided a little below that for this year.

Meaning the investors are worried about your execution into this spin, obviously. And there's I guess concern about the PC market maybe slowing. But just overall execution maybe into a tough currency environment, into this split.

So in conclusion, what can you say to assuage their concerns that gets you closer to where your sum of the parts is and so they feel confident you're going to do it, you're going to do it crisply?

Cathie Lesjak

So we're going to do it, and we're going to do crisply. We recognize both the headwinds as well as the tailwinds. And in terms of the split execution, as I mentioned, we have a group of people who wake up every single day. All they do is think about how they're going to split.

And then the vast majority of the company is focused on how we're going to meet our goals in fiscal 2015 and we are staying maniacally focused on that. And we have made a deliberate effort to keep them separate, so that the folks that have to deliver on the goals for 2015 are not disrupted in any way by the separation.

The outreach that we had with customers and partners was not only well executed from my perspective, but the feedback that we got from customers and channels partners is overwhelmingly this is the right thing to do.

Well, we think this is what you should do, and we're there with you. And we're not hearing concerns from customers. And ultimately, it's the customers who obviously are going to buy, generate the revenue, and get the profit. And we are staying maniacally focused on cost structure and on cash flow.

End of Q&A

Ben Reitzes

Well, I want to thank you for being here. I also want to congratulate you. We've come a long way in 3 years, right?

Cathie Lesjak

We have, a long ways.

Ben Reitzes

We spoke that night on a Friday, and we've had quite a rebound. So I hope you can keep it going. And I thank you for all your support, not only today, but over the years. And thank you so much, Cathie.

Cathie Lesjak

Thank you very much. Thank you, everyone.

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