VIDEO: HP Reduces Operating Company Net Debt

Nitesh Sharan is Director of HP Investor Relations.

Maintaining a strong balance sheet and stable access to capital markets is crucial within the technology sector, which is characterized by rapid innovation. The sector is currently undergoing a tectonic shift due to advancements in cloud, big data, mobility and security, which we refer to as the New Style of IT. From a financial perspective, Hewlett-Packard is fixing and rebuilding its capital structure to ensure we can continue to invest in innovations for the New Style of IT.

HP’s balance sheet is presently strong, but there is still work to do. One of several metrics we look at when evaluating our financial health is the operating company net debt. At HP’s October 2012 Securities Analyst Meeting, we publically highlighted our goal to bring that metric down towards zero. At the end of Q1 FY13, that number stood at $4.7 billion—down approximately $7.1 billion year-over-year from $11.8 billion.

HP runs two separate business models, an industrial or “operating” one and a financial one. The financial business, HP Financial Services, is HP’s vehicle for providing customers with financing, leasing and asset recovery services, and that business model requires that HP Financial Services maintain a significant net debt position. The video below focuses more on HP’s operating company net debt position than the net debt positions of the total company and HP Financial Services because operating company net debt is a better indicator of HP’s ability to invest in innovation. The difference between HP’s total company net debt position and HP Financial Services’ net debt position is the operating company net debt position.

For the executive perspective, hear directly from the HP Investor Relations team about priorities and progress related to operating company n et debt.