Is HP's Turnaround Real?

Editor's note: Jim Cramer told viewers of his "Mad Money" TV show on Tuesday that Intuitive Surgical (ISRG) and Potash (POT) are two ugly ducklings set to become beautiful swans. Here's another stock with those same characteristics.

NEW YORK ( TheStreet) -- Last year Hewlett-Packard ( HPQ) was a market dog, its shares falling from $26 to $16.

Now it has made almost all of that loss back, but in technology terms it is still ridiculously undervalued.

You're paying less than $1 for every $2 in HP sales, in an industry where the reverse ratio is considered pretty low. Oracle ( ORCL), with barely one-third of HP's sales, is still worth more than three times as much to shareholders.

Although CEO Meg Whitman told analysts on her latest earnings call that you can "feel the turnaround," as VentureBeat wrote, it's hard to see that in the numbers.

Profits are finally there, but they are anemic, and sales are continuing their slow slide down.

Whitman is also continuing to chop-and-change her management team. Just this week she moved the head of her $60 billion PC and Printer division, Todd Bradley, into an amorphous staff job where he will reportedly try to fix the company's channel relationships, especially in China.

AllThingsD reports that sales and profit margins in that division are continue to plummet and that Bradley's replacement, Don Weisler, had been running that same Asia-Pacific sales group before stepping into his new job, spending most of his career with Lenovo and Acer.

Then there's the cloud.

HP's "Converged Cloud" plan, announced last year, is starting to take some big wins, such as Dreamworks, as Zacks notes, but not all the wins it's announcing are actually wins.

At a recent HP Discover event in Las Vegas, for instance, software chief Bill Veght loudly claimed Workday ( WKDY) as a customer. But SiliconAngle learned a few days later that Workday company remained tied to Amazon ( AMZN) and its public cloud.

The NSA PRISM scandal has also driven many cloud customers underground, writes GigaOm research analyst David Linthicum, causing European customers to resist any contact with American cloud companies.

HP's idea of "Converged Cloud" is that companies would have the ability to integrate public clouds like Amazon Web Services with their own private clouds, which HP is building with open-source OpenStack. But open-source suddenly looks very bad if the NSA has a key.

Almost two years into Whitman's reign at HP, the company remains basically a PC and server company in a world that's swiftly moving toward devices and services. It lacks a presence in phones and tablets, having jettisoned its webOS system under Bradley for Microsoft ( MSFT) Windows Phone, which is still a market failure, and for Google ( GOOG) Android, where it has no differentiation.

Every move Whitman makes is done with flash, a smile, and promises of momentum. In the first half of the year, investors have been buying that, knowing that -- in conventional terms -- HP is still one of the cheapest tech stocks you can buy.

But if Whitman had won her race to be governor of California in 2010, promises of tomorrow being better, and that austerity must be suffered, would not be working two years in. She's hoping shareholders are more patient than voters, still telling people to trust her while results remain promises and not facts on the ground.

How much longer is that going to work? I give it six months. If HP hasn't made real progress on its biggest problems by January, calls for radical change are going to grow louder.

At the time of publication, the author owned shares of GOOG.

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

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