Maven: H-P Gets Slashed on Savings

That's a fine point most of the coverage of its earnings report misses.
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The Business Press Maven is not sitting here this morning saying that

Hewlett-Packard's

(HPQ) - Get Report

core business is profoundly troubled or headed for some fall to subsistence level. Hardly. It's doing a decent job of peddling its commodity products.

But I want you to take a seat on my knee so we can look together at today's coverage of the company's earnings, which, by and large, really gets it wrong. We'll also enjoy the welcome sight of an article that gets it right.

Much of this morning's coverage, however, expresses shock that the stock slipped a bit in after-market trading Thursday following the company's announcement of earnings that exceeded expectations. (Let's graciously overlook the fact that this so-called "slip" was an 80-cent price swing on a $40 stock, a move that could -- and, at least glancing at premarket trading early this morning, would -- be reversed.)

But the reason given for this purportedly counterintuitive turn is the company's statement that the

Securities and Exchange Commission

had ordered a formal investigation of that whole insane spy thing, in which corporate officials planned to bug half the Western world.

But that's not the major reason the stock reacted tepidly.

You wouldn't know it, of course, from reading the

Associated Press

: "

HP Shares Slip Despite Surging 4Q Profit

," blared the headline, which spoke the puzzlement. The sub-headline echoes the surprise and then runs that relatively minor cause for concern up the flagpole: "HP Shares Slip After 4Q Profit Quadruples, SEC Orders Formal Probe of Spying Tactics."

In case you didn't get it from the repetitious headline, the lead beats the dead horse: "Hewlett-Packard Co. shares slipped after the company said fiscal fourth-quarter earnings quadrupled but the Securities and Exchange Commission had ordered a formal probe of its boardroom spying scandal."

Got that? It's the spying, stupid, that's done in the stock.

The article then goes on to discuss stock performance, earnings, comparison to troubled

Dell

(DELL) - Get Report

, the investigation, back to the stock price and ... way, way, down in the third sentence from the bottom, only two little lines about how the company said it had completed the bulk of its money-saving, restructuring program.

We'll get back to that in a moment. Just know that

MarketWatch

offers

basically the same pair of buried lines about the end of cost-saving opportunities.

Reuters

, which scored a phone interview with Mark Hurd, the semi-embattled CEO,

speaks excitedly

of future guidance and doesn't even mention the end of cost savings as we know it for H-P.

MSN Money

mentions

a "sour note," but it's -- you guessed it -- the investigation.

The Business Press Maven wants you to compare all that endlessly told nonsense to

The Wall Street Journal's

accurate take

this morning. Look at the headline, so instructive: "H-P Net Soars, but Pressure for Sales Gains Rises: Earnings Aided by Cuts as Overhaul Concludes."

Got that? It's the end of the line for easy cost savings, stupid. If H-P's going to do anything from here, the pressure is on to drive top-line growth. How are things looking there? The brainy Christopher Lawton tells us in his lead:

Hewlett-Packard Co.'s fiscal fourth-quarter earnings quadrupled and its revenues rose 7.2% as it expanded sales and profits across its core businesses. But with the technology giant's restructuring plan largely complete, the company forecast the same rate of growth this fiscal year.

That's right, we get

whole paragraphs

on the conclusion of major cost-cutting. Though the business media in general, after not focusing on the spy scandal in the beginning, now are overly focused on it, the

Journal

knows it's old news and zeroes in on the key element going forward. That is, going forward for Hewlett-Packard will be an act of wringing cost savings out of a rock. Management can't do it. It needs to grow on the top line, which the company says will rise by only 6%. C. Lawton, any chance of upside surprises there?

"Because H-P is so large, it may be difficult to expand at a much faster rate, say analysts."

Thank you, and goodnight.

Wait, one more thing.

Sometimes companies are seen alongside each other in the public eye in a way that advances investors' understanding. Hewlett-Packard and Dell are, appropriately, always mentioned together. They are direct competitors, and one has almost always been up while the other is down. Same goes pretty much for the recent do-si-do of

Wal-Mart

(WMT) - Get Report

and

Target

(TGT) - Get Report

. When you see those two together in a headline, you know that the structure of the story to come -- what one is doing vs. the other -- may shed light on retail reality.

Other times, a shared storyline is a stretch, more a matter of saved space and convenience, and you should avoid being lulled into making any lazy connections. The

same MSN Money story

that fails to recognize H-P's problems for what they are is titled: "H-P wins cheers; Starbucks is booed."

The "one good, one bad" construction here is too simplistic. For one: H-P did not and should not win cheers. And

Starbucks

(SBUX) - Get Report

came up a couple of cents shorter than it would have in its current quarter, but that was due to accounting, not lattes. Revenue and same-store sales still look decent. But a "good girl/bad girl" headline about unrelated companies doesn't.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children.