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June 25, 2012

HP's deepest woes: ahead, or just behind?

Trench-warfarejpgThe financial press is treating the HP 3000 customer to a full spectrum of Hewlett-Packard analysis by now. At the close of June 25 trading, the company's stock was at a seven-year low of $19.55 per share. (And that November, 2004 price was four years after a 2:1 split.) The price is tied to market valuation and makes this vendor of 3000 migration replacement systems a more attractive takeover target. This is no longer just a matter of HP's employees keeping fair value in their retirement accounts.

But HP's been within 10 percent of this newest low before, even within the last year. How much this should matter in selecting a replacement enterprise system -- well, it depends on who you're asking. Even the customers have views on this, although the ones making their stand on the 3000 have been more eager to speak up.

In response to one report on an HP breakup, which said even last summer "the reality is that Itanium is dead, dead, dead," Tracy Johnson said circling sharks wouldn't bite on HP's morbid tail. Sharks like Oracle haven't been imagined in HP's waters.

"Is it really a matter of Itanium, or any other product line?" Johnson wrote on the HP 3000 Community at LinkedIn. "HP is already the walking dead. It's not the sharks; sharks prefer live prey. It is rather the vultures and jackals that feed on carrion that will pick on HP."

Strong sentiment, but not unusual among the customers which HP left behind to maintain systems and an ecosystem without vendor assets. However, the business finance community has a few analysts who see this week as the deepest of HP's stock troubles. Some are believing HP's now got nowhere to go but up.

In the San Jose Mercury News, an article said that the company's shareholders are already growing impatient with CEO Meg Whitman's turnaround.

Keeping investors happy isn't something corporations take lightly. In many companies, including HP, the top executives own much of the stock themselves and don't want to see it devalued. If the share price sinks too low, other investors may seek to oust management, the company could have a harder time raising money for acquisitions or capital improvements, and it could become vulnerable to a takeover. Moreover, if the value of its stock options plummets, it might have trouble retaining and attracting the skilled workers it needs.

Pessimism, or the extra dose of realism, is the most direct assessment of the company's futures. One writer at Seeking Alpha, however, sees at least a stock rebound in the near future. Tiago Romao writes that what he considers a hardware company in turnaround is being pummeled too hard in the markets.

"This company is very attractive and it has been consolidating at the present values for almost a month," Romao wrote last week. "Notice the book value per share is $20.87 and the market price has made a technical support around this value. In short, HP is a profitable company with an attractive price to earnings ration, good margins, trading near its book value and technically has been consolidating for a while and may be preparing a rebound."

NASDAQ's GuruFocus, which tracks picks of top investors, noted that 18 of 30 investors increased HP holdings in the last quarter. HP Chairman Ray Lane increased his holdings by more than 20 percent.

The other response to the decline of the company's fortunes and futures: sadness. One article in Fortune, just after Whitman arrived, detailed the live-blogging of her speech to employees, critical reports "that wish HP ill" coming right out of the room where she was speaking. 

"It's so sad to see this happen to HP," said Kees den Hartigh, CTO at the social media provider Progmic. "I never worked for them. Probably never will." Progmic and den Hartigh develop communications to reach HP's consumers. As a career open systems technology expert, he's also posted from the Connect user group's Twitter feed as recently as last year.

Short of the science fiction needed to revive a CEO genius like Steve Jobs -- or as some in the LinkedIn community wish, the resurrection of HP's founders -- Hewlett-Packard is facing a long return to its strength in the era when it canceled its 3000 futures. From the stock split just a year before that 2001 event, to talk of sharks, carrion and a rebound back into the $20s and back into earnings and revenue growth, is a long trek as well. At the HP-UX group of LinkedIn, the discussions among those Itanium users are technical instead of business-related. The Unix customers may as well keep their eyes on IT tactics, since they can't do much for the strategy outlook, except look upward.

04:32 PM in Migration, News Outta HP | Permalink

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