Hewlett-Packard avoids the noose -- for now

Hewlett-Packard (HPQ) CEO Meg Whitman has repeatedly told investors clamoring for a turnaround at the struggling tech giant to be patient. Finally, it looks like investors' patience could be rewarded, though the celebration may be premature.

Shares of the company -- founded by Bill Hewlett and Dave Packard in a one-car garage -- are sharply higher in Friday morning trading, buoyed by better-than-expected​ quarterly results and an upbeat earnings forecast. The actual numbers, however, were not good.

Net income fell 16% to $1.23 billion, or 63 cents per share, versus $1.47 billion, or 73 cents, a year earlier. Revenue fell 6% to $28.4 billion. Excluding one-time items, profit was 82 cents. Analysts surveyed by Bloomberg News expected profit of 71 cents on revenue of $27.8 billion. The company also gave bullish guidance.

HP's businesses serving both corporations and consumers posted across-the-board declines, indicating that much of the upside the company saw in the quarter came from cost-cutting. HP last year announced plans to slash 29,000 jobs from its workforce. While saving money is a good thing, companies can't just cut their way to profitability.  

Whitman, the third HP CEO since 2010, is beginning to see some reasons for optimism. However, even she noted in an interview with CNBC today that the turnaround will take several years. The company expects the second half to be better than the first and for 2014 to be even better, Chief Financial Office Kathie Lesjak told the Wall Street Journal. HP was also optimistic that new products now in the works will gain traction with customers.

As the economy continues its slow road to recovery, companies will increase spending on computer hardware, software and services. Gartner expects worldwide info-tech spending to hit $3.7 trillion this year, up 4.2% from a year earlier. That's an increase from an earlier forecast of a 3.8% gain.

Unfortunately, HP's main rival IBM (IBM) remains a formidable competitor. Big Blue recently reported a record quarterly profit. While revenue at the Armonk, N.Y., company is likely to be flat over the next two quarters, HP's sales are expected to decline. Dell (DELL), which is going private, also is showing some signs of improvements in stemming its own stunning decline.

Whether Whitman will get enough time to finish righting the HP ship remains to be seen.

Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr.

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