HP Doesn't Have to Be Apple

NEW YORK (TheStreet) -- While it is still too early to proclaim the resurgence of Hewlett-Packard (HPQ), Wall Street should start giving the company, and in particular Meg Whitman, credit.

For all the talk of the death of the PC due to the dominance of Apple ( AAPL) and Google ( GOOG), HP is growing modestly in other areas of its business.

Although it is often loathed for not being Apple, the company appears to have discovered ways of being the best HP that it can be by figuring out ways to grow its high-margin segments such as services, networking and storage.

After its most recent earnings report, the company's management inspired confidence that it can do what many think is impossible -- turning HP's fortunes around while also placing it on a path towards restoring lost credibility and returning value to shareholders.

The question is, will it be enough to erase the persisting doubt about its future? Although things continue to progress as well as its circumstances will allow, HP still is unable to escape the grasp of what it isn't, as opposed to what it is. It seems the company continues to suffer because its logo is not a fruit.

Granted, at one point the company did suffer from a personality complex by entering into Apple's territory with its TouchPad tablet without being adequately prepared. However, as a long time HP apologist, I will concede that standing up to Apple is no small task for even dominant companies, much less one that has had a revolving door in the CEO's office.

HP's mistake was in not having fully assessed its strength or the current market dynamic to realize Research in Motion's ( RIMM) PlayBook, Dell's ( DELL) Streak and even Cisco's ( CSCO) Cius tablet were all falling by the wayside.

Apple understood consumers whereas the specialty for HP et al was the enterprise. The problem is, the enterprise user and the consumer became one and the same, which placed them all at a considerable disadvantage -- or in this case, Apple's mercy. Today, they have all caved in as Microsoft ( MSFT) and Google are now in the tablet market while Amazon ( AMZN) is intent on building a larger Kindle Fire.

What's left for HP?

For one thing, HP has Meg Whitman, who appears ready and able to clean things up. It is clear she has the management structure in place to get the company where it needs to go. But as good as things appear to be progressing now, will it ever be good enough?

Also, the company needs to overcome a disappointing history of weak research and development, in which it has chronically under-invested.

Where HP falls short on innovation, it hopes to make it up in execution. This is where Whitman has centered her focus and is the reason for Wall Street to take notice.

But I wonder, where should the bar be set and should it be bold enough to include ever beating Apple at its own game? I suspect that is what HP is positioning itself to do.

At this point I think it's a bit bold to assume HP is ready to take Apple head on. Any reports supporting this notion are overly optimistic.

Rather, the company will be better served by focusing on ways to grow its margins and bring together a more efficient operation. That includes a recent strategy to save the company over $3 billion over the next couple of years.

In other words, the company doesn't have to be Apple to be good, it just needs to be the best HP it can be.

At the time of publication, the author was long AAPL and held no position in any of the other stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.

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