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Cramer: How to Save Hewlett-Packard

Editor's Note: This article was originally published at 7:34 a.m. EDT on Real Money on Aug. 22. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.

NEW YORK ( Real Money) -- What do you do if you are Meg Whitman, CEO of Hewlett-Packard (HPQ - Get Report), now that she's had to hit the reset button on the turn at the huge computer company?

How do you stop the bleeding of a company that saw an 8% decline in revenue growth this quarter? How do you turn around sales in 2014, given that in the last four months she's gone from predicting an increase in revenue for next year to saying that such an increase would be unlikely?

First, here's the good news. Despite some pretty hideous numbers, including PC consumer revenue being down a staggering 22% and enterprise revenue being off 9%, the bleeding has been stopped.

In fact, lost in all of the disappointment is the fact that the cash is building despite a 14% decline in earnings, with cash flow from operations at a healthy $2.7 billion, albeit down 6% from last year. The company knocked off $1.7 billion in debt, which is the sixth consecutive quarterly reduction of more than $1 billion dollars.

Still, though, it's daunting, and when I interviewed Meg Whitman last night in preparation for today's sit-down, I struggled to find analogues to what must be done to get revenue rolling again.

She suggested I look at two of the greatest turnarounds of all time for help:
  1. the IBM (IBM) turn engineered by Lou Gerstner beginning in 1993; and
  2. the transformation of Starbucks (SBUX) by a returning Howard Schultz in 2008.

They did take a similar path -- fix the balance sheet first then grow the company.

Admittedly, in Howard's case, the world didn't turn against coffee. He had a rising tide, but the company was looking pretty dour, and the stock had gone from $38 down to $20. It all seems very easy now, but the stock did dip to $7 before its remarkable run to $70.

But IBM, where Gerstner basically saved the company from going belly-up is the more cogent comparison. IBM had fallen from $36 in 1991 down to $10 in 1993 before Gerstner came in, and he had the company growing pretty quickly with the stock rising to $139 six years later.

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