2 HPs not necessarily better than 1
The company will struggle no matter how it's configured.
Moreover, the analyst argued, company founders Bill Hewlett and Dave Packard would want to split the enterprise from the PC and printer businesses. I'm not so sure.
For one thing, splitting a weak company would not necessarily create two stronger ones, especially in HP's case. The timing also is not great given the economic uncertainties, which will force tech companies to slash prices on hardware and offer deals on services to win business from cash-strapped enterprises. Consumers are reluctant to go into debt to buy new hardware that does not have the Apple (AAPL) brand.
HP businesses has lackluster growth potential on the both enterprise and consumer sides.
Take servers. Recent data from Gartner shows that factory revenue for these computer workhorses is on the decline. Though HP, based in Palo Alto, Calif., is slightly leading IBM (IBM), growing that business will be difficult. Many high-tech firms such as Google (GOOG) and Facebook (FB) have found it more cost effective to build their own servers. Companies are also not enthusiastic about hiring outsiders to assist them with IT projects.
Spending on IT services are expected to rise 2.3% this year, down from growth of 7.7% in 2011, according to Gartner. Even IBM (IBM), which says it is the largest provider of IT services, is struggling. Big Blue's services backlog as of June 30 was $136 billion, down 6% year over year. Unless the economy picks up speed, it's hard to see this sector improving significantly. HP will need to fight IBM and Dell (DELL) for business.
The picture is similar in the PC market. According to Gartner, HP led in PC shipments in the second quarter, accounting for 14.9% of the market -- a decline of 12.1%. "HP’s PC business has not been back to pre re-structuring level yet," the market researcher said. "The company also faced aggressive pricing from Lenovo in the professional market, and threats from companies such as ASUS and Samsung in the already crowded consumer markets."
The future for HP is bleak as it is currently stands and not much better if it ever split. No wonder CEO Meg Whitman isn't keen on the idea.
Jonathan Berr does not own shares of the listed companies. Follow him on Twitter@jdberr.
More from Top Stocks
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Start investing in technology companies with help from financial writers and experts who know the industry best. Learn what to look for in a technology company to make the right investment decisions.
Hotels and restaurants are increasingly fighting back against negative online reviews -- by suing the writers. So be careful how you phrase your disgust with that disappointing dinner.
VIDEO ON MSN MONEY
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'