This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

HP May Still Face Tough Decisions

Stocks in this article: HPQLXKIBMEMCAAPL

NEW YORK ( TheStreet) -- HP (HPQ) CEO Meg Whitman has earned plaudits for her efforts to revitalize the troubled tech giant but more drastic changes may still be needed.

Brought in last year to replace the ousted Leo Apotheker, Whitman quickly gave the no. 1 PC maker some much-needed strategic direction. Quickly nixing Apotheker's controversial plan for a potential PC spinoff, the new CEO took the bold move of merging HP's PC and printer divisions. Whitman also opted to open source the acclaimed webOS operating system and oversaw HP's support for ARM's (ARMH) low-power chips.

In May, Whitman made one of her toughest decisions yet as the Dow component announced plans to cut 27,000 jobs, or 8% of its total workforce, as part of its broader restructuring.

UBS analyst Steven Milunovich acknowledges that Whitman is "making smart moves" such as centralizing the firm's strategy, sales and marketing, but warns that this may not be enough to succeed.

"We question whether HP is 'better together' and that it might be 'smart to be apart,' specifically spinning off printers and PCs," he explained, in a note released on Tuesday. "HP lacks the pure enterprise focus of IBM (IBM) and EMC (EMC) yet will have trouble competing for consumers without strong tablet and phone businesses like Apple (AAPL) and Samsung."

PCs and printers are, of course, key parts of HP, accounting for just over half of the company's second-quarter revenue. The products are also seen as a way for HP to sell additional products and services, particularly in the enterprise market. Analysts, however, have already warned that the PC and printer merger is hardly a profit-laden silver bullet.

HP is also facing significant financial headwinds, according to Milunovich, as the tech sector wrestles with a cautious spending climate. Set against this backdrop, the analyst initiated coverage of HP with a sell rating and $16 price target on Tuesday.

HP, he explained, faces an uphill financial battle for a number of reasons. These include declining printer sales, enterprises downsizing their services, execution issues and PC profits coming under pressure.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,162.25 +187.94 1.11%
S&P 500 0.00 -2.75 -0.14%
NASDAQ 4,568.3010 +19.0750 0.42%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs