Hewlett-Packard Company (HPQ): You Will Make Money From This Turnaround

Those who invested in Hewlett-Packard Company (NYSE:HPQ) at the beginning of the year are now enjoying a spike of around 45% in the stock price. The company has had some serious troubles in the past, resulting in the deterioration of its stock price. However, the turnaround strategy has now started paying off, leading to higher satisfaction among the shareholders.

Hewlett-Packard (HPQ)

While companies like Dell Inc. (NASDAQ:DELL) and International Business Machines Corp. (NYSE:IBM) have already shifted their focus onto the services and analytics segment, Hewlett-Packard Company (NYSE:HPQ) is still in the process of this transition. This transformation also offered shareholders a happy ride alongside rising stock prices. But the bigger question at this moment is:  “Will this growth ride continue?”

Let’s discuss this stock in detail.

Restructuring on track

2013 will be the year of recovery for Hewlett-Packard Company (NYSE:HPQ), as it’s when most of the restructuring will be completed. The restructuring activities focus mostly on cost-savings and the alignment of the company’s workforce to support various growth initiatives and innovations.

HP’s restructuring is on track with a target to reduce 29,000 (up from 27,000) employees by the end of 2014, out of which 15,300 workers have already been retrenched.

This workforce reduction will result in projected savings of around $3 billion to $3.5 billion annually, and the majority of these savings will enhance the company’s bottom-line results in 2013 and 2014. And, the remaining savings will be reinvested in R&D across storage, cloud and security solutions.

The growing platform

Since the acquisition of Vertica in 2011, Hewlett-Packard Company (NYSE:HPQ) has been betting big on its investments in big data analytics. Vertica is a prominent big-data services vendor. As per IDC, this industry is expected to expand at a compounded growth rate of around 31% annually through 2016.

I believe Vertica’s further penetration into this market is immensely supported by Hewlett-Packard Company (NYSE:HPQ)’s global channel reach. While most of the current data warehouses concentrate on structured data, Vertica offers solutions for semi-and-unstructured data, such as log data, communications and weather data.

Also, HP recently announced that it has increased its R&D investments under the recovery plan. It’s targeting around $1 billion on R&D and the marketing of its big data portfolio this year.

Out of this, $800 million is allocated for Vertica. The company is seeing huge potential in Vertica, which now has 10-times the revenue that it had at the time of the acquisition. I see Vertica as the next growth pillar for Hewlett-Packard Company (NYSE:HPQ) and expect it to continue the same revenue growth in the future, as well.

Peer review

As stated above, Dell Inc. (NASDAQ:DELL) and IBM are slightly ahead in the race as far as the transformation is considered. Since the buyout news started floating in, Dell shares have gained momentum, producing returns of around 50% in the last six months. The company is still looking out for some attractive buyout offers for its shareholders.