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.

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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."

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

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