HPQ – After a long winter

Dare I hope that Hewlett Packard is turning the corner?.

• Hewlett Packard’s response to the message sent by its shareholders at the recent AGM encourages me to take a second look.
• Hewlett Packard has had two main problems to date.
  • First, the lack of any real strategy to change a lumbering hardware maker with a dominant position in a declining market, into a growth company.
  • Second, the lack of a dynamic management team and board of directors to conceive and effect such a strategy.
• The removal of Ray Lane, John Hammergren and Kennedy Thompson is an excellent sign that Hewlett Packard is at last remembering that shareholders are the owners of HPQ and that they want change.
• It is also an excellent sign that these three were the some of the longest serving members of the board but critically, are the ones who had narrow re-elections at the AGM.
• Most of the rest of the board joined in 2010 or 2011 giving me some hope that with these three gone, some fresh ideas can be put across the table.
• That being said, most of those remaining approved the Autonomy acquisition and the track record of some of them is not exactly encouraging.
• I am hopeful that this marks a turning point where the executives run the company rather than the board and that this will result in a strategy to turn the company around.
• Hewlett Packard is extremely cheap on almost all measures and there are now some signs that something is being done to rectify the malaise that has gripped this company for the last few years.
• This implies that there is not much left in the way of downside.
•  The shares are priced for a gentle decline into oblivion meaning that upside is effectively for free.
• I am starting to get interested in what the company has to say about realising that upside.