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Hewlett-Packard Company (HPQ)’s Meg Whitman Relying On International Business Machines Corp. (IBM)’s Already Sputtered Growth model

Hewlett-Packard Company (NYSE:HPQ) CEO, Meg Whitman’s plan for the company’s comeback cannot save the doomed tech company from joining the ranks of fallen stars, according to Bloomberg‘s contributing editor, Paul Kedrosky.

Hewlett-Packard Company (NYSE:HPQ)

Whitman has claimed that she has a concrete plan for recovering the company, which involves focusing on the enterprise customers and providing them with cloud services and software solutions. According to Kedrosky, this International Business Machines Corp. (NYSE:IBM) pioneered strategy is simply not going to cut it for Hewlett-Packard Company (NYSE:HPQ).

“[…] I think that it’s an old play in the book. I think what she is trying to play from is the IBM playbook. If you recall, they made a similar transition away from hardware into much more of an enterprise IT services company, and were rewarded for that over time. It was a pretty prodigious cash flow generator, but you have already seen early signs that that model is at least beginning to sputter, if not actually fail. You can see a little bit of that in the current Hewlett-Packard Company (NYSE:HPQ) numbers […],” said Kedrosky.

There was a very surprising entry in the company’s earnings report for the third quarter. Although growth had nonexistent traces, but the company’s Desktop business was actually growing. Hewlett-Packard Company (NYSE:HPQ) has sent considerable resources in scaling down that side of the business. Did the company make a mistake?

Actually, no. The expansion of different companies and an overhaul cycle for most companies meant that they had to replace or buy new hardware, and this is more of a one off event, rather than a steady source of growth.

Sometimes in the tech sector, companies which have remained dominant in a particular market segment for years start a journey into the downward spiral, and people keep hoping for that magical revival. According to Kedrosky, Hewlett-Packard Company (NYSE:HPQ) is part of this classic case, which is suffering from the shrinking market segment that it used to operate in, and is now clutching at straws to keep afloat.

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