Welcome back, everybody. Lets get back to our guest host for the last word. Jim, you said at the very top of the show, that in your opinion, the fed has accommodated and the net policy will stick around for some time to come. The last word here, i want to mention one thing we havent talked about today, which is that the fed president s all signed a letter on Money Market Mutual Fund reform. I think thats an important statement. And a big risk is still out there, i would like to see that reform get moving. Jim, thank you so much. Glad to have you here. Make sure you join us on monday. Right now time for squawk on the street. Good friday morning. Welcome to squawk on the street. Im melissa lee, with scott wapner and james cramer. Carl quintanilla is on assignment and david faber is in palo alto, california, getting ready for his big interview with meg whitman. It looks like a comeback. Dow looking at 89 right at the open. Look at the picture in europe. This is really being driven by those eco numbers, giving stocks a bounce. Despite forecasts that the euro area economy will see backtoback years of contraction for the first time. Of course, now the focus turns to the weekends italian elections. Overnight in asia. Shanghai is closing out its worst weekly loss in two years. Nikkei managing to close higher. Road map this morning starts with the markets. We results from aig and upgrade for home depot helping stocks today, and hewlettpackard. Hp is popping premarket on the back of the earnings. Sigh of relief for the investors as the company showed some progress with its turnaround. David will have the exclusive with meg whitman in just a few minutes. More signs of consumer trouble. Nordstrom gives a weak outlook. Darden revising lower its outlook for the year. We start off with the markets. Pointing to a big rally today as the market recovers from fears that the fed will halt its easing process sooner than expected. This after stocks post their biggest twoday drop of the year, closing at two and a halfweek lows in the heaviest vim trading day in 2013. I feel that there were some calls yesterday on Dennis Garvin saying 100 cash. That kind of call i think will be tested. I think theres a mix the pictu picture. Whats developing, good news, bad news. The 100 cash call, which i think shocked the market, may not hold off on the daily today. It seems to overreact to anything fed. The minutes happened a month ago, january 3rd, we all got spooked, it sold off. That was a negative feeling in the market. A couple days ago, minutes come out, market gets spooked and here we are higher today. The german confidence numbers, for many for 30 years i didnt care whether the germans were confident or underconfident. Who cared if they felt good or bad. Now its the end all, be all for how the european stocks do. And therefore, how we here in the United States do. Exactly. And i think that what happened is in the last couple days, we started getting gripped again by china. Maybe chinas not strong enough. Very worried about europe. Then you add those on to the fed minutes and think, wait a second, doesnt the fed know theres a gasoline that theres a run, a speculative run . Doesnt the fed know about this . Where are they . The irony of the fed minutes is they said they should consider changing the pace of qe, so if the economys better, right, theyll pull back qe. Or if there are questions about the efficacy of the program, in which case it doesnt matter if theyre in there, because it doesnt work. So either way, it would be good in theory. What i thought was disheartening, for a couple of weeks we were focusing on stocks, on companies. M a, right . Focusing on the pickup in m a. And then we see, oh, no, its not the pickup in m a, its the spanish banks. Arent you worried about berlusconi . I am not going to go back into a world where all i care about is italian unemployment. Just not going to go there. I worry about our unemployment, so does bernanke. It proves again, to the fed, the minutes are old news. Bullard exclusive on cnbc, comes out and says, were easy, and were going to be easy. Dont worry. The punch bowls not going away. You can still drink. Its okay. Thats extraordinary. Weve heard him go the other way. Now, can he get people in washington to not talk today . Good luck with that, jim. Thats always my worry, that they have mouths, microphones. You have the sequester fast approaching. We should put up a countdown clock. Thats coming. What, are you not worried . You better start worrying right now, partner. Ill climb my own wall of worry. Stop worrying about the ballet, and the guys on the ice. Thats a different conversation for another time. Fear matters. Hewlettpackard trading higher in the premarket after better than expected quarterly results. The company reporting secondquarter results and a forecasted above expectations as it cut costs under ceo meg whitmans turnaround plan. David faber is live at hewlettpackard hq in palo alto, california, where hell be speaking with meg whitman in a few minutes. Thanks, scott. The stock looks to be up. I heard you mention a number of analysts deciding to raise their price targets after the Conference Call yesterday. Although, interestingly, hewlettpackard did not adjust its own number in terms of what it expects to earn per share for this full year. Despite what was, as you said, a better first fiscal quarter and pointing to a bit better fiscal quarter, at least than the analysts who followed the companies it anticipated. It is not as though there are still signs of weakness. Certainly the pc business, certainly what well talk to meg whitman shortly about as well, continue to show signs of deterioration. How do you manage these painful transitions is a key question for hewlettpackard. As it is still dealing with all of the key sectors seeing revenue declines. Now, thats not a surprise. Whitman has pointed to that for 2013, talking about 2014 as a year in which you may start to really see growth yet again at the company. And so many people embracing that number from yesterday. At least saying, hey, you know what, things arent quite as bad as we perhaps had thought. Certainly a lot better than they were last quarter when we were dealing with that fraud and autonomy, enormous writedowns and lots of other questions, including the deterioration of the underlying business. Well talk more about that, and the Enterprise Group and get a sense as to whats going on in europe and china very shortly. Back to you guys. David, well certainly look forward to that interview with meg. Do you have the feeling the turnaround is taking hold as the bulls are sort of trying to spin that story forward this morning . Stuff like the beating of the comps, they talk about how the data center coming on, storage coming on, printers coming on, then you have what really happened, printers down 5 , storage down 4 , data center, storage down 13 , data center not doing all that well. Margins contracting in everything but printers. Right. Its kind of, look, were doing well, you just keep seeing the soldiers being killed. Not terrible is the new good for hg. Theyre expecting the worst from hewlettpackard. Theyre looking for signs of deterioration. The analyst from evercore said it wasnt a deterioration into nothingness. It doesnt take much at this point. You still take a look at the higher value segments of the business, the software business, what is supposed to be the savior of hewlettpackard and those were down year on year. Were not going to fade into darkness. I guess the tone on the desk is a little negative towards the results, obviously. What is it going to take for that story to start actually really being better, real better . Theyre not going to break it down. Up 2 . Cash flow. Could they get rid of all their debt . That could be an incremental positive. The fact that its a freeflow interview with david out there. That interview is straight ahead. Fabers exclusive with hewlettpackard ceo meg whitman. Well get her first reaction to the companys firstquarter results next. Looks like the futures are going to be a nice open on the street. Dow looks at an implied open of 79 points, or thereabouts. Nasdaq getting a nice rebound after a new day of selling. [ male announcer ] to hold a patent that has changed the modern world. Would define you as an innovator. To hold more than one patent of this caliber. Would define you as a true leader. To hold over 80,000. Well that would make you. The creators of the 2013 mercedesbenz eclass. Quite possibly the most advanced luxury sedan ever. See your authorized mercedesbenz dealer for exceptional offers financial services. Lets get back to david, who is at hewlettpackard headquarters in palo alto, california, with an exclusive interview with the ceo meg whitman. David . Thanks very much, melissa. As you said, were here in the headquarters. The building has been redone a bit. Thank you for having us and hosting us. Meg, yesterday, at the conclusion, or near the conclusion of your prepared remarks in the Conference Call, you characterized the quarter and sort of hewlettpackard as saying the patient showed some improvement. What exactly does that mean . Well, i think its accurate. We put down a very good deposit towards our full year performance that we have told the street would be 3. 40 to 3. 60. We beat the the high end of our guidance by about 11 cents a share. There were very bright spots in our performance. But weve got a long way to go. Im clear, this is a multiyear journey to the turnaround. And throughout your comments, the prepared comments, even in the q a, youve said it in our interviews as well, multiyear, you continue to say that. Anything changing your opinion as to how long this will take . No. I think last year we characterized as a diagnosis, and laid the foundation year. We really needed to understand exactly what the challenges were and what the opportunities were going to be, and lay some pipe to set us up for a better 2013 in terms of products that are introduced to the market, our gotomarket, our relationship with our channel sellers. You probably know the channel really builds hewlettpackard. Well see revenue acceleration as we go into 2014. Why not have increased guidance, and guided the analysts to a higher number than they anticipated for the second quarter. We do feel very good about certain parts of our business. But we also face some headwinds. First of all you mentioned in your opening, the pc business faces some challenges. We should talk more about that. Europe is a very tough economy. And we have the highest market share in servers of any competitor in europe, so when europe is soft, were disproportionately hurt in that business. So we thought it was better to not get out over our skis, you know, one quarter we got three more to go, and we want to make sure were cautious, and this business changes very rapidly. Indeed it does. Lets get to pcs, because there the changes perhaps happening more rapidly than some had anticipated. Sales to consumers down 13 , sales of pcs and notebooks deteriorating quite rapidly, more rapidly than you anticipated. This is a painful transition. How do you manage it and what do you tell people to expect when youre just talking about a unit that does 10 of your operating profit, at 2. 7 margins . Yeah. So theres a couple of reasons we really like this business. And first of all, there is a huge transition taking place. The reason weve never called this business the pc business, we call it the personal systems business. Its an important difference, because if youre just talking about pcs, versus everything from virtual desktops to work stations to desktops, more traditional desktops to laptops to hybrids to tablets all the way to smartphones, thats the personal compute. Perm compute is growing. Everyone wants to create, consume and share. So we like the overall market. But there is a transition from more traditional form factors to new form factors. Theres also a transition from really one operating system to multioperating systems. What is this going to look like if in fact you get it right . Not saying you necessarily will, because managing these kinds of transitions are somewhat unique. We simply have no idea whether consumers are ever going to buy a pc or notebook again. At hp, weve got to reallocate resources just from our pc business to the mobility business, to from one operating system to multi operating systems. We have to allocate some more resources to services. Because profit pools are shifting here. Think about whats happening with devices. I mean, i dont know how many devices you have, i have four. So how you manage those devices, how you manage that convergence. Security, hp knows more about balancing access with security than any other company. And heres the other reason why this is an important business to us, no one knows more about computing than hp. And its a core dna, part of a dna of this company. So we like being able to go from the device to the data center. But its a tough transition to manage. But you know whats great about technology . If you miss one trend, theres another one right around the corner, and the Development Cycles and the speed at which this is moving is incredibly rapid. You appreciate that speed, and can you stay with it. Yes. There are many investors saying youre doing 8 billion a quarter, a tiny margin. Its not a big part of your business anymore, get rid of it. But its a strategic part of the business. You know, theres a lot going on in technology. This is some of the biggest shifts in technologies that ive seen in my career. You know, about every five to ten years, theres a big shift, whether it was from the main frame to the Client Server environment, server to web 1. 0, to what i would characterize as 2. 0 web services. Were going through another sea change in terms of how technology is bought, how its paid for, how applications are developed. We happen to have a fantastic set of assets that i think positions us incredibly well. My predecessors, even through all the turmoil, really assembled a terrific set of assets that will allow us to take advantage of what i call this new style of i. T. Were the only company that can go from devices that connect to this new style of i. T. To hardware to software to services, that i think can position hp incredibly well in the next Big Technology way. Do you feel like youre able to measure everything you want to do . We all look on wall street at signs of progress being, well, will you spend the revenue, how is the stock price doing, earnings per share. What do you look at to really gauge progress that youve made . 18 months, 16 months since you took the job. Yeah. Can you measure everything you need to to figure out whether youre making progress . The first thing i look at is products. Hp is going to come back on the foundation of breakthrough Innovative Products that customers really want, that help solve our customers toughest problems. I think if you talk to most people in the industry, i was at our Partner Global conference earlier this week in las vegas, and we had the top 2,100 partners at that event. They said this is the strongest product line up weve seen in hp for ten years. In ten years, one of the criticisms is innovation is no longer something we think about when we think about hewlettpackard. What do you see as a real innovation for this company . First is in our Enterprise Group. Your listeners should know it gives us 43 of the profits of hp today. I dont think most people dont understand that. They still just think printers and pcs. Exactly. For example, well start shipping in march a revolutionary new Server Technology called moon shot. Which is effectively servers that are built on arm chips and atom chips. Almost the same chips you have in your cell phone. So much less space. 92 less space, 86 less energy, and half the cost. So this is revolutionary. And we started taking orders. Youll be interested to know, our first order came from a company in japan. The reason why . Japan lost 25 of their grid from the tsunami. I was in japan last summer, and the Office Buildings were only being cooled to 84, 85 degrees, because they dont have the grid. So this kind of product is revolutionary. And should allow tremendous breakthrough in hyper scale computing, high tense di computing that schangs the game. Thats the kind of thing hp is known for. And transitioning into that business as well, parts of the server business are in decline. Convergence are in ascent. This is a deal that was done quite some time ago, where you fought with dell. Thats another transition thats painful and uncertain that you have to manage in addition to the pc business. When you run a Big Technology company like this, there are these transitions. I think because much the change of the ceo, and the sort of drama that happened at this company, those transitions maybe werent managed as well as they could have been. But thats part of being in the technology business. Youre managing products that are new and changing the games. Threepar storage was called converge storage. It was simple architecture, better storage than anything on the marketplace. But we have our traditional storage products that are declining. Weve got to get three par bigger than our declining products and all of a sudden well have a growing storage business, which were confident it will. We talked a great deal about autonomy last quarter. Certainly dont want to dwell on it. But im curious, where is the investigation, in your opinion . There were a lot of questions at the time, well, is it really everything youre saying it was . Or was it more just hewlettpackard screwing it up, my words. Where are we on that investigation . Is there anything you can point to . Yeah. Well, you recall at the end of last quarter we took a writedown on autonomy. We said, listen, there were misrepresentations of the Financial Condition of the company. And so listen, since then, we feel even more strongly about those allegations. And the department of justice, the s. E. C. And a number of enforcement agencies are taking up this case. And what i said last time is, weve done our work. Were going to turn this over to the authorities. Obviously tell them everything that we know, that our internal investigation is ongoing. And then weve got to go back and run the company. And thats what im focused on. And ive turned this over to our very capable legal team. The wheels of justice turn slowly, but were confident and finally, were more or less out of time here. But we continue to here the murmurs, they should break the company up. Its unclear where these things come from. They arent true, but do you feel like you have the full surt support of your board and the basic idea that this company is Better Together than it is apart . Yeah, we do have the support of the boa