HPQ Q4 – Deadly drift

Meg has stabilised the ship but it still has no course.

• Things are better at HPQ but there remains no real plan for the future making the company very vulnerable to more innovative and nimble competitors.
• Q4 Revenues / EPS were $29.1bn / $1.01 compared to estimates of $27.8bn / $1.00.
• Revenues from corporations was responsible for the surprise where servers, storage, networking and corporate PCs all saw higher revenues than the year before.
• Consumer was weak as has become the norm.
• Guidance was given for Q1 and FY14 EPS at $0.82-$0.86 and $3.55-$3.75 which is in line with consensus at $0.85 and $3.66 respectively.
• Meg has done a good job in stabilising the ship and HPQ’s weathering of the slump in the PC market is fair.
• However, this company has no strategy that I can find and until it gains one, it is just going to drift.
• This is, by far, the company’s biggest weakness.
• My issues around management have, by and large, been addressed as most of the supervisory board has been swapped out.
• HPQ has a group of reasonable assets which are related to one another but it seems to have no clue whatsoever how to put them together to create something special.
• This is why the stock is on 7.2x 2014 PER and there it will stay until something changes.
• This makes the company very vulnerable to competition.
• Things are changing very quickly in this space and HPQ is a massive and easy target for innovative offerings looking to gain market share.
• By just sitting there and not doing anything, HPQ’s is ensuring that it will always be on the back foot reacting to the market rather than driving it.
• This is no mean feat. Leo Apotheker famously tried and failed to change HPQ.
• Meg Whitman has stabilised the ship but does not seem to have the vision to succeed where Leo failed.
• The stock remains uninteresting.