Hewlett-Packard Company (HPQ): Does It Pay to Believe in This Company?

Page 1 of 2

Faith can move mountains, as they say, and time and again we have seen its incredible ability to hold sway over millions of people. And despite all its number-crunching analytic stance, even Wall Street does not seem to be immune to its effects, as was evident in its reaction to the latest quarterly results of ex-PC industry giant Hewlett-Packard Company (NYSE:HPQ).

Meg Whitman

CEO Meg Whitman and her team seem to have successfully convinced the Street as well as investors for now that the company is on track to display revenue growth once again in the near future, of course with a lot of ‘ifs’ and ‘buts’ attached. The stance paid off very well as the company’s share prices rocketed up by a whopping 17% post declaration of its second quarter results, even though revenue and profit both took a plunge. That’s why it’s time to separate the wheat from the chaff and find out what may be actually going on behind-the-scenes at Hewlett-Packard Company (NYSE:HPQ). And when you do that, you just seem to realize that the future may not be as bright as it’s projected to be.

Smart but not sustainable

The whole scenario at present can be boiled down to one sentence: Hewlett-Packard Company (NYSE:HPQ)’s slowing the losses through cost-cutting, but there’s no word yet on new avenues of revenue generation. And that’s as good as being dead for a company whose main line of business took a 14% plunge by way of shipments in the first three months of this year, according to research firm IDC.

Merely looking at the near-doubling of the company’s free cash flow or the 44% increase in its operating cash flow may only be good enough to create a temporary feel-good factor, but then that’s the logical outcome when part of your cost-cutting plans include axing up to 29,000 company jobs. That may be a smart way to beat expectations, but not one that inspires long-term confidence. Ultimately, Hewlett-Packard Company (NYSE:HPQ) has to make money for itself by selling its products, and isolated instances pertaining to sales in the printer division are surely not enough to inspire long-term confidence.

Some are moving forward

And even Microsoft Corporation (NASDAQ:MSFT), a company that’s perceived to be slow moving and one that Hewlett-Packard Company (NYSE:HPQ)’s currently trying to distance itself from, is also moving into newer and hot-selling areas like phones, tablets and cloud computing in a bid to rake in more revenue. And its gamble seems to be paying off well. The Windows phone-based operating system now holds third spot in the smartphone segment, after Google’s Android and Apple’s iOS, as per latest IDC data. And while opinions may be divided over the success of Microsoft’s Surface range of tablets, there’s no doubt that the company can make it big with its new cloud-based Office 365, given the fact that Windows still remains the corporate customer’s favorite computing software.

And others are digging their own grave

As far as HP is concerned, the only other thing it can draw consolation from, apart from the feeling of having beaten analyst expectations despite plunging top lines, is that its in a relatively much better position than close industry rival Dell Inc. (NASDAQ:DELL). That’s because the latter has posted a jaw-dropping 79% dip in profit in its latest quarterly results, and is in the process of going private, as a part of Chairman Michael Dell’s restructuring initiatives (if you can call it that). Dell Inc. (NASDAQ:DELL) is slashing product prices in a desperate attempt to gain market share within the quickest possible time even at the cost of its own profitability, a strategy which HP rightly declined to follow. I’m using the word ‘rightly’ because that’s really a short-term way of getting one up over your rivals and one that dents your company’s image badly, even though all that Dell is doing in recent years is trying to get a firm foothold in order to avoid falling off the edge of the cliff. Whitman’s at least right on that count.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!