Strategically, there are also major long-term question marks hanging over HP. In particular, Whitman needs to crank up the innovation engine. One of Silicon Valley's original trailblazers, HP has been criticized for falling behind the likes of Apple ( AAPL) over the last decade. "The longer-term challenge for HP is
to drive growth in its PC business," notes Sterne Agee's Wu. "Obviously, an improvement in the macroeconomic environment would help, but HP needs to drive more innovation and create products that customers desire." HP's attempts to drive innovation should include the critically-acclaimed WebOS mobile operating system, according to Wu. The raft of controversial changes announced by Apotheker in August included ditching hardware based on WebOS, spelling the end for HP's TouchPad tablet. The Palo Alto, Calif.-based company should, however, rethink its WebOS strategy, says the analyst, echoing concerns that HP is relinquishing one of the most potent weapons in its arsenal. "While it may be costly, we believe HP should at least give its WebOS operating system a fairer chance at success before deciding to pull the plug," he explained. "The alternative the company should also seriously consider is to sell WebOS to a leading mobile device maker like Samsung, HTC, or Amazon ( AMZN), who may make better use of the technology." HP's chairman Ray Lane has already said that the company can make money out of WebOS by licensing it out to third parties, although precise details on the future of the technology have not yet been revealed. Boosting HP's business around high-margin areas such as software and services, is another huge challenge, with HP desperate to emulate the success of arch-rival IBM ( IBM). The $11 billion purchase of U.K. data analytics software specialist Autonomy will play a part in this effort, although the new CEO must also make sense of Apotheker's somewhat muddled strategy around cloud services and connectivity. Critics of HP's latest move warn that it will be even more difficult for Whitman to boost margins with the PC business in tow. "We don't view this decision to keep PSG positively for HP," notes Brian White, an analyst for Ticonderoga Securities. "We believe the company would do better for shareholders to focus its efforts on enterprise initiatives that play into secular trends in the data center such as cloud computing." Shares of HP, which have tumbled more than 23% over the last three months, gained 59 cents, or 2.19%, to $27.58 on Friday. -- Written by James Rogers in New York. >To follow the writer on Twitter, go to http://twitter.com/jamesjrogers. >To submit a news tip, send an email to: email@example.com.