For Hewlett-Packard Company (NYSE:HPQ), the end of 2012 could not come soon enough. The company’s revenues and earnings were down. Its main business, personal computers (PC’s) and printers, is in decline. The stock price is reflective of the company's poor performance and is down by almost 50% for the year.

What Went Wrong?

The biggest problem that HP has is that it is at the wrong end of the computing business. Desktop computers and even laptop computers are now considered old school, while tablets and smartphones are all the rage. There is still money to be made in the computer business, but the money is being made by companies that provide cloud based computing solutions. Companies like Apple Inc. (NASDAQ:AAPL) and Samsung have seen both their earnings and their stock prices flourish. Old school computer companies like Hewlett-Packard Company (NYSE:HPQ), Dell Inc. (NASDAQ:DELL), Intel Corporation (NASDAQ:INTC) and Microsoft Corporation (NASDAQ:MSFT) have fallen behind, and their stock prices are near 52-week lows.

Microsoft's RT Surface has had a tough time gaining traction against competitors like Apple. In an interview with French newspaper LeParisien, Microsoft CEO Steve Ballmer said sales so far have been “modest.”  According to Barron's roundup up of analyst estimates, Microsoft sold 1 million Surface tablets at best last quarter. Citigroup analyst Walter Pritchard thinks Microsoft sold between 700,000 and 800,000 Surfaces last quarter, while Goldman Sachs analyst Heather Bellini predicts Surface sales will only reach meager 230,000 units.

Apple, on the other hand, sold 22.9 million iPads in its most recent quarter, up from 14 million in the previous quarter. This marks a 33% increase year-on-year, compared to 15.4 million during the same period in 2011. On top of this, the iPad mini is performing so well that some analysts think it is eating away at sales of its larger iPad counterpart. I believe a change in consumer mindset for lower cost products and greater device mobility is fueling iPad mini sales growth.

On top of all this competition in the hot tablet space, a recent report by the World Economic Forum highlights the core problem for HP. It predicted that in 2012 PC sales will decline for the first time in 11 years. There are a myriad of reasons for the decline in PC sales. Weak macro-economic conditions, cannibalization from tablets and smartphones as mentioned above, elongation of replacement cycles (I have had my PC for 4 years) and the final straw is full penetration in emerging markets. Analysts at IDC and Gartner said PC shipments in this year’s third quarter were down by 87.5 million, or 8% lower than a year ago. What is particularly troubling for HP is that the decline in PC sales will be an ongoing trend.  Todd Bradley, the head of Hewlett-Packard’s PC business, said he thinks the core PC market will stay flat “potentially through 2015.”

The second reason that I would not invest in HP is that the company has had too many changes in management and too many horrible acquisitions. After so much confusion and so many missteps it will take quite a while to turn the company around. The purchase of EDS and Compaq were terrible mistakes, but the 2011 purchase of Autonomy for $11.1 billion was devastating. The purchase did not help the value of HP’s portfolio and HP has written off $5 billion of Autonomy’s value. In addition on November 21 HP confirmed that the U.S. Department of Justice was investigating Autonomy’s books. Over the last 10 years HP has spent $67 billion acquiring companies and its current market cap is less than $27 billion.  These mistakes have hurt HP badly.  They have caused the company to take on excess debt ($28.4 billion) and will hamper its ability to restructure itself as it moves forward.