The mystery of Meg Whitman's HP
You can't buy stocks based on nostalgia, on hope or on faith. But that's about all Hewlett-Packard has to offer investors. If the company has a destination, what is it?
Hewlett-Packard (HPQ) may be the right stock to contemplate over Memorial Day. It's like a good mystery novel, a real "beach read." Only we don't know how it ends.
Forbes has been pounding the table for HP this week, publishing a hagiography of CEO Meg Whitman, a piece by the same author touting the stock and a third piece highlighting its cash flow, Whitman's favorite metric (since others aren't doing so well).
I, on the other hand, have been very negative on HP, and Whitman. I've called her strategy a "FUD offensive," using fear, uncertainty, doubt and PR to hide the complete lack of a mobile strategy, the fading of its key printer niche and its unprofitable ties to Microsoft (MSFT). (Microsoft owns MSN Money.)
Still, it's true that HP is dirt cheap. Despite being up more close to 70% this year, you're paying just 35 cents for each dollar of sales. That's the reverse of the normal tech multiple, closer to what a retailer like Kroger (KR) might cost. The ratio is worse than that of Dell (DELL), which thinks so little of the market's valuation it wants to go private.
There remain three good reasons to be skeptical of Whitman's HP:
- PC and printer sales are still shrinking overall.
- There's no real mobile strategy in the market.
- The cloud hasn't materialized in the way HP's strategy has anticipated.
Dell has the same problems, only not to this degree. It doesn't have a printer division, which is like a boat anchor on results. It has adjusted its cloud strategy away from OpenStack, which, as I've noted, lacks a compelling public cloud component. It still has its services division, while HP wrote off its dubious EDS acquisition years ago.
We want to believe
When you buy HP, you're taking hope over experience, what George Anders himself -- Whitman's Forbes hagiographer -- calls a "gut sense" that she can steer the ship toward profit.
But what's the destination?
Maybe Whitman really is a wizard of a manager with her own reality distortion field. But what would a highly profitable HP look like? What would it be making? Cloud components that the biggest public cloud companies, like Google (GOOG) and Amazon.com (AMZN), reject as too-expensive, preferring to build their own? Leadership in failing businesses like PCs and printers? Mobile? what, exactly?
I would dearly love to be wrong about HP. Despite the fact that the "real" HP, the instrumentation and testing equipment maker Dave Packard and Bill Hewlett made their names on, was spun out with Agilent (A) in 1999, it's still the grand old name of Silicon Valley, the mother tree from which the rest of that forest sprang. We want to believe it can be what it was again.
Memorial Day is a time when we look into our past and seek inspiration from the sacrifices of those who have come before us. It was a good time for HP to launch another PR attack, and pound the table for stock in this great old company.
But I can't buy stocks based on nostalgia, on hope or on faith. If I'm going on a buggy ride, I want to see the destination. I don't see any yet for Hewlett-Packard.
Please tell me I'm wrong, and what that destination is. I'd like a solution to this mystery as much as anyone else. I want to believe, too.
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Where HP has excelled, is in business technology support. HP has never been a consumer focus company. Tablets and smart phones never fit into their business plan. HP is a business company, with durable and exchangeable products. When a business is looking for a laptop, or CPU Tower to run an advanced equipment, they are all going back to the experts, and hp knows business.
Look for HP to hit $40 by September 1st.
Hate to see HP in trouble, I own one compute by them, and have always bought their printers, they have the best printers money can buy, and their ink cartridges last. The computers they make are meant for business, I upgraded the one I have for gaming, and it does real well, it is about 5 years old so this year it became my Linux machine. My new machine is an octocore AMD with ASUS board. My next computer down is a 6 core. Just game my Quad core to my kid, and then comes my dual core HP now running at 3.2 ghz.
Of course there is always my Amiga's, still using them and they still do what I want them to do.
Trouble today is that the younger generation aren't thiking big computers, they are playing with tablets and iphones ( wouldn't own a rotten core product if they gave it to me).
Good luck HP, your better than Gatefake (who put the last nail in the coffin of the Amiga).
Best printer on the market.
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