Hewlett-Packard Company (HPQ), Intel Corporation (INTC): Is a Turnaround in Tech Possible?

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Hewlett-Packard CompanyAll the talk about turnaround tech is concentrated on the  Dell Inc. (NASDAQ:DELL) saga, but Dell Inc. (NASDAQ:DELL)‘s major peer is in just as bad shape. Even still, Hewlett-Packard Company (NYSE:HPQ) has some big-time backing from activist hedge funds.

The most notable is Relational Investors. Hewlett-Packard Company (NYSE:HPQ) is the fund’s largest investment, with Relational owning some 34.5 million shares — making up 15.8% of the hedge fund’s public equity portfolio.

Meanwhile Richard Pzena’s Pzena Investment Management also owns over 34 million shares, 5.7% of its 13F portfolio. Other notable investors include Viking Global with 10.5 million shares and Yacktman Asset Management with 9.2 million.

The stock is up 90% year-to-date, thanks in part to the Dell buyout, which gave all PC-hardware investors belief there might still be value to be had in the PC business. But the outlook for PC hardware is bleak, as tablets and mobile devices cut into the PC market share. IDC believes that global PC unit shipments fell 3% in 2012. Hewlett-Packard Company (NYSE:HPQ)‘s turnaround around story hinges on its ability to reduce costs quickly and effectively. But the weak economic environment will serve up other headwinds as well.
Hewlett-Packard Company (NYSE:HPQ) has been one of the top players in the PC market for a number of years, with its market share hovering at around 15%. Going forward, Hewlett-Packard Company (NYSE:HPQ) hopes to focus on the server segment. But the tech giant has vast exposure to the printer market. I think the company will look to spin-off or sell this segment, which could unlock value for shareholders.

The tech decline isn’t limited

Intel Corporation (NASDAQ:INTC) is down nearly 12% over the past 12 months. The tech company is the world’s largest manufacturer of microprocessors, which are heavily tied to PCs. Even still, revenue is expected be down only 1% in 2013.

Offsetting the decline in PC-related revenue should be growth in data-center revenue.  Intel Corporation (NASDAQ:INTC) ships some 80% of the world’s microprocessors. Sales of microprocessors and related chipsets for PCs make up 64% of sales, and microprocessors for servers, workstations, and other applications are 20% of sales.
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