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 Preview: What Wall Street's Saying

NEW YORK (TheStreet) –– HP (HPQ) continues to remake itself under CEO Meg Whitman, slashing costs and boosting sales of personal computers, so it can afford to wait for other sectors of its business to catch up.

HP's largest segment by revenue remains personal computers, with sales in its Personal Systems group growing 7% in the fiscal second quarter from a year earlier. The company's results backed up Gartner's analysis in April that HP increased its market share, particularly in Europe, the Middle East and Asia.

For the fiscal third quarter ended June 30, HP expects non-GAAP earnings of between 86 cents and 90 cents a share. Analysts surveyed by Thomson Reuters expect HP to earn 89 cents a share on $26.99 billion in revenue. HP reports results on Wednesday after the market close.

Read More: Why HP's Turnaround Plan Is Starting to Work

For the entire year, HP estimates non-GAAP earnings between $3.63 and $3.75 a share. The company plans to take a 95-cent-a-share GAAP charge "related primarily to the amortization of intangible assets and restructuring charges."

When Gartner released its worldwide PC shipment findings for the first quarter, it found that sales fell 1.7%, to 76.6 million units, but HP showed gains. Thanks to strength in EMEA (Europe, Middle East and Africa), HP owned 16% of the market, selling 12.2 million units, up from 15.1% or 11.78 million in the year-ago quarter. That's good enough for second place behind Lenovo, which continues to dominate the PC market (including -x86 tablets, but not other tablets). Lenovo had 16.9% of the market at the end of the first quarter of 2014, up from 16% a year earlier.

But HP's other segments--including printing, enterprise services, software and financial services--all showed no growth or declines, which led to an additional restructuring and layoffs of 11,000 and 16,000 employees, on top of the 34,000 announced in May 2012.

On the second quarter earnings call, Whitman said the additional layoffs will help long-term efficiency.

"We've actually increased the number of people who will leave the company a couple of times during this program," Whitman said. "And actually on earlier call, we actually signaled that there might be more opportunity. And I am actually not disappointed at all with how we're doing, we just see more opportunities to lower our cost structure, streamline our operations without impairing our effectiveness in fact making us a more nimble and decisive company."

CFO Cathie Lesjak added that the cuts give HP the opportunity to"create more capacity to invest," noting that the tech giant's turnaround hinges on the company's ability to innovate and bring new solutions to the marketplace that are different to the competition's.

Despite the rebound in the PC segment, it's clear HP has a lot of work to do to turn itself around and get the top line growing again. The company is increasing spending in research & development, with CFO Lesjak noting the increase is coming in not one particular segment, but all areas.

"Just about every business that we have is increasing R&D on a year-over-year basis," she said. "Obviously it's focused in strategic areas--cloud, big data, security, page-wide array, 3D printing. So it's really not a specific comment for a particular business." Read More: 10 Stocks Carl Icahn Loves in 2014

Going into Wednesday's earnings report, analysts were slightly bullish. Here's what a few of them had to say:

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 17,055.87 -116.81 -0.68%
S&P 500 1,982.77 -11.52 -0.58%
NASDAQ 4,508.6880 -19.0010 -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