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HP replaces Enterprise Group head after suffering Q3 financial losses

Hewlett-Packard has swapped Wall Street darling Dave Donatelli for chief operating officer Bill Veghte to head its Enterprise Group, following another disappointing quarter which saw the computing giant's sales dip eight per cent year-over-year to $27.2 billion (£17.4 billion).

HP, which reported its fiscal third-quarter earnings this week, is now at a critical juncture in a five-year rebuilding plan which started at the beginning of 2012, according to CEO Meg Whitman. As the company moves into a new phase of that process, Whitman said she had determined that HP's enterprise business was changing and required new leadership to reflect that shift.

"Bill Veghte has been our COO and brings a tremendous amount of software expertise to a business that's now more dependent on software," she said. Whitman described the executive shuffle as part of an effort to "accelerate into the next turn" of HP's rebuilding effort.

Donatelli, known as an aggressive sales manager, will shift to "a new role focused on identifying early-stage technologies as he did successfully with 3PAR and 3Com," the company said in a statement. Veghte assumes his new role immediately.

HP is also merging its Marketing and Communications units into a single organisation which will be helmed by chief communications officer Henry Gomez.

The company's third-quarter revenue slide saw sales dip from $29.7 billion (£19 billion) in the same period a year earlier, a decline Whitman and chief financial officer Cathie Lesjak attributed to a moribund PC market, flat global IT spending, and pricing churn in the datacentre market.

Whitman offered a fairly grim assessment of the current PC industry, which been severely challenged by growing global demand for powerful smartphones and tablets now being used to perform computing functions which were formerly the sole province of desktops and laptops.

"The PC market has not stabilized this year as much as I anticipated it would by this time," she told investors and analysts on a conference call.

Without any significant presence in the consumer mobile device market since scrapping its TouchPad tablet and essentially closing shop on its webOS mobile software platform, HP's fortunes are tied to the rise and fall of the PC market but it can still do better, analyst Patrick Moorhead said.

"The PC market is in a funk, but HP is also losing market share to Dell and Lenovo, a big issue," said Moorhead, chief analyst for Moor Insights & Strategy. "I'd like to see HP address a few things in personal systems. First, they need to effectively develop and execute a plan and communicate how PCs help the rest of their business other than driving free cash flow. There has to be synergy there and this plan will help keep financial analysts off their backs.

"Mobility is a huge, growing space, but HP isn't in smartphones and their first lower-priced tablets aren't differentiated enough to drive significant interest and share. One bright spot I see are some of their commercial tablets like the ElitePad 900, which has the ability to severely challenge the iPad in large enterprises, but that's a small part of a growing market."

HP actually posted a big gain in net income for the quarter, with profits of $1.4 billion (£900 million) bettering the $8.9 billion (£5.7 billion) loss posted in the same period last year. But the bulk of that loss a year ago was due to a write-down associated with an accounting scandal that soured HP's 2011 acquisition of Autonomy — minus the write-down, HP earned $2 billion (£1.3 billion) in the third quarter of 2012.

Whitman has asked investors to remain patient as HP works its way through a multi-year rebuilding process.

"I remain confident that we are making progress in our turnaround. We are already seeing significant improvement in our operations, we are successfully rebuilding our balance sheet, our cost structure is more closely aligned with our revenue and we have reignited innovation at HP, with a focus on the customer," she said.