HP Results and Outlook Disappoint Investors

Wednesday on Wall Street saw the three major US stock indexes – the Dow Jones industrial average, Standard and Poor’s 500 and Nasdaq composite – lift initially, buoyed up by stronger-than-expected data from ADP and the economy’s service sector. But the significant gains were cut by sharp drops in Hewlett-Packard’s shares following the report on company earnings and earnings outlook by CEO Meg Whitman, and Wall Street ended the day only modestly higher. Friday’s employment numbers are the next big market mover investors will be waiting for, while the economic situation in Spain is also causing waves in global markets, with Wall Street not being immune to its effects.

When Meg Whitman took over the reins as CEO at Hewlett-Packard in September 2011, she had the daunting task of turning the company around in a world faced with breathtaking technological advances. Her first major decision in her new role was to focus on promoting the PC business the company was considering dumping.

Whitman’s message to investors and analysts at a meeting Wednesday, following the biggest quarterly loss in the history of Hewlett-Packard, was that the company’s earnings are likely to fall by more than ten percent next year. This is no surprise to analysts who have been following one of the world’s biggest technology companies, but investors had no doubt been hoping for better news and after Whitman’s presentation, HP’s stock dropped thirteen percent, dragging the company’s shares to the lowest level seen in almost a decade.

Whitman has pointed out that she inherited a poorly managed company that has lagged behind in the current wave of innovation in all its divisions. From the very beginning she has assured investors of her commitment to rehabilitating HP, but warned that it will take several years to achieve this. She reiterated this theme, noting that it could be 2015 before HP’s revenue experiences growth, but envisions the company’s revenue increasing at the same rate as the overall growth of the US economy by 2016. But investors are concerned that while HP tries to get its house in order, competitors such as IBM, Apple and Oracle, will be streaking ever further ahead, leaving HP perpetually lagging behind.