Checking In With Tech's Four Horsemen: HP

Let's recap in broad strokes how we got were we are.  Meg Whitman takes over as CEO, gets a brief honeymoon.  She eventually produces not only a clear, new strategic plan and resets expectations for a multiyear horizon.  From the fourth quarter of 2012 until recently, the stock goes on a tear from $12ish to $27ish, before pulling back testing the $20 support level.

The initial guidance strategy, depending on your viewpoint, was to take investor expectations to the sub-basement.  Another way of looking at it would be to say that management told it "like it was."  A multi-year turnaround.  Lots of industry and macro headwinds.  Lack of innovation and commitment to deliver new products.  Sales organization problems.  Executives in the wrong spots on the roster.  And so on, and so on.

The promised staff reductions came quickly, and the ramp up of this program caught some skeptical analysts by surprise.  Along with some one-time factors, good tax planning, and cash flow management, debt was paid down faster than expected and the share repurchases continued.  What was not to like about this?

We believe that the dysfunctional culture within HP and the organizational discouragement precipitated by the reigns of the imperial and imperious Mark Hurd and the clueless Leo Apotheker have gained traction and buy-in within the rank-and-file.  The new board members, given their stature and experience would certainly not have come on ship if they didn't fully vet the longevity and outcome of the turnaround.

So, here we are, but where is that?  The consensus view of analysts for the Analyst Day outlook revisions are that the company, which has already cautioned about no 2014 revenue growth, will revise this outlook down sharply, for both the revenue and earnings lines.  In other words, "No Expectations."

Targets have been lowered, and some analysts have projected a price decline to the mid-teens, post the revised outlook.

In the meantime, the company seems to have introduced both Windows and Android tablet lines aimed at the corporate accounts.  So, their stated intention of being the best, platform-agnostic supplier of hardware, software and services to global corporate accounts seems well underway.  That's pretty encouraging.

As we've said before, there is still some significant portfolio optimization to be done, e.g. on corporate technology services.  Lowering expectations would give good cover to announce this now, but I'm not sure that it's on the radar at the moment.  Not a big deal.

Given that Dell has shot itself in the thigh with its acrimonious deal that couldn't have given its customers or employees much comfort, HP's visibility with corporate accounts should continue to increase.  That's good.

So, we definitely go into Analyst Day, with "No Expectations," which is okay, and we return to the Stones for a closing serenade,