HP’s Shares Slump To Nine-Year Low On Earnings Warning, Whitman Notes Turn-Around Might Not Come Until 2016

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News Posted: Thu, Oct 4 2012 10:04 AM
Former Ebay CEO and current chief of Hewlett-Packard, Meg Whitman, inherited a company that was (and remains) on top of the PC pile, but also one that was struggling to find direction. She replaced Léo Apotheker, a software guy who wanted to exit HP from the PC business and focus on software and printing, a strategy that didn't mesh with the Board's vision for the future. As such, Whitman jumped into the fire feet first, was handed the reins, and essentially told, 'Here you go, fix everything.'

That's what she's been trying to do, but some things take time. While speaking to financial analysts this week, Whitman hit them with the news that earnings would take a dive, revenue was about to fall in every sector outside of software, and that a full turnaround in the company's fortunes might not come until 2016.

Investors reacted by sending shares of HP's stock down 13 percent on Wednesday, surpassing the biggest single-day decline in over a year, and devaluing the company by about $4.36 billion. Shares of HP are now trading at $14.40, the lowest they've been in 9 years, and more than 40 percent lower than what they were trading at during the beginning of the year.

HP Balloon
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"We have much more work to do," Whitman said.

Is Whitman the right person for the job? That remains to be seen, but you have to admire her strategy. According to a report in The New York Times, hitting investors with a mountain of bad news was part of her strategy, even knowing full well that they would likely react like this. Why? Simply put, anonymous sources tell NYT that Whitman wanted to get all the bad news out in the open at once and focus on rebuilding, rather than having to explain to investors quarter after quarter why things continue to look so grim.

Going forward, HP's biggest threat in the PC space is Lenovo, which may overtake HP for the No. 1 spot. Not only is Lenovo finding ways to weather the recession and sell PCs, it's also creating goodwill by recently announcing plans to open a U.S.-based PC production facility, which is expected to be operational next year.
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rapid1 replied on Fri, Oct 5 2012 8:27 AM

The desktop and laptop market right now not to mention servers and workstations (with servers being the most stable period) is in a major flux as not only is everything shiting constantly so is the general usage pattern. I personally with my small business probably use my smart phone and the linked in capabilities to my internetwork and financial transactions plus communications in general and GPS etc probably use my Smartphone more constantly. However; in general I manipulate everything over my desktop, not to mention I prefer it in general as it is easier to work on (as in typing larger display faster reaction etc). The market 2 years prior to her taking over HP is gone. Parts of it still exist but I do not ever see it being what it was with HP hardware.

One thing that is big also is part of what is happening in the US politically as well. This is across different ages and is the internet and this constantly available technology path. The oldest generation uses the TV and the phone and gets on the computer if they have to, the next generation it shifts a bit, the next it shifts more, and the next it is even, then the next the internet/smart phone/computer it the top device to a great amount after that those become the standard. Take this as a reality and collide it with Presidential debates that happened a few nights back, then realize a large portion of the population has already made their choices for this election, the realize the next portion of society in the US will never see anything but snippets at most of that debate and they will get there info completely from the web in that form. Then put the speed of that communication into form with that reality and you realize not only is it instantly changing for some it is completely a mesh with others.

The reality is more straight on for HP and in return for Meg WHitman. She is going to have to be an ultimate master here to do this. I have heard she is that as well and we will see. HP has one of the best mobile OS's that has not been put to use in reality but Blackberry had the other one and look where they are, if you put iOS/Android and even Winphone8 into that it does not fit as those three have matured where as BB and HP's mobile OS's have not. I think HP is going to become a shell of its former self and BB will disappear just like Nokia is doing now to a lesser degree than BB. That is of course unless Meg is the master she is rumored to be and innovates and changes the behemoth.

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While the Lenovo brand came into existence only in 2004, the company has a much longer history. It has consistently outgrown the worldwide PC market in unit shipments and gained market share across all geographies, products and customer segments, making it the fastest growing of the four major PC companies in the world for two years running. Further, it shows that while HP still holds a very slight edge over Lenova in the worldwide market, Lenovo for the first time, has officially become the largest PC maker in the world.

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