H-P's Turnaround Rings True

Updated from 7:09 a.m. EST

It took nearly five years for Hewlett-Packard to go from aging but respected tech giant to over-the-hill and irrelevant dinosaur. The silver lining to such a fate is that the company's turnaround might turn out to be just as long-lasting.

H-P's stock has emerged as one of the most unlikely stars of the tech sector for 2005, rising 34% in the past six months. Not every company with $87 billion in revenue sees that kind of a gain. And that performance isn't far behind Google , everyone's favorite runaway stock, which is up 39%; and it's even better than the 31% rally seen in Motorola , which is being hailed as the turnaround of the year.

Compared with its peers, H-P's rally since June is even more striking. IBM is up 19% and Dell is down 22%. And that adds up to an impressive first act from H-P CEO Mark Hurd. At the beginning of 2005, if you had polled investors on which of the above stocks would be up more than 40% at almost year-end, H-P almost certainly would have lost the vote.

But that was when Carly Fiorina was at the helm. H-P's stock was trading around $50 when Fiorina showed up with promises to bring the aging tech giant into the 21st century. After three years, the stock was trading below $11, and for the following couple of years, Fiorina was never able to nurture it above the $20 mark for long -- resulting in a market cap that was two-fifths as large as when she showed up.

But is it too late for investors to get in on the recovery? Some analysts don't think so. Cindy Shaw at Moors & Cabot Capital Markets (which has no underwriting relationship with the company) believes H-P's strong performance in the quarter ended Oct. 31 is just the prelude to further gains that are tied to restructuring savings and IT improvements, both of which will play out for the next few years.