Can Whitman Convince Analysts of HP’s Profitability?

On Wednesday October 3, Hewlett-Packard (NYSE:HPQ) CEO Meg Whitman will meet with Wall Street analysts for the first time since assuming the position.

While the company has avoided many problems that have plagued it in recent years, including acquisitions gone awry and management shake-ups, many analyst still view Hewlett-Packard as a lumbering technology behemoth. Wednesday’s meeting comes amid increasing concerns over the company’s ability to compete in the consumer and corporate technology markets.

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Analysts’ worries are evident in the declining value of the company’s stock, which has fallen by 30 percent since the beginning of the year.

During the company’s most recent earnings conference call, Whitman acknowledged Hewlett-Packard faced “a number of challenges.”

For many analysts, the problems Hewlett-Packard now faces are very similar to those that besieged IBM (NYSE:IBM) in the 1990s. Following a path very much like IBM, Whitman has announced massive layoffs recently and consolidated facilities worldwide. However, while IMB CEO Lou Gerstner rescued the trouble company, analysts now fear that Whitman will be unable to do the same.

In the most recent quarter, Hewlett-Packard’s revenue fell by 5 percent and its operating margins dwindled; in comparison, profit margins at IMB and Apple (NASDAQ:AAPL) were several times that of HP.

Hewlett-Packard may be the largest personal computer vendor, but the slow growth in the markets the company dominates, personal computers and printers, have raised concerns for analysts. Last year, the company’s own concerns over the personal computer market prompted then-CEO Lou Apotheker to announce that HP might end its PC business, but Whitman has yet to pursue that strategy.

According to the New York Times, Whitman plans to unveil a new strategy at Wednesday’s meeting with analysts. She envisions a more customer-focused, information-everywhere HP with restyled PCs whose screens break off into iPad-like tablets. While the company has thus far stayed on the sidelines of the transforming the industry, Whitman is anxious to compete with Apple, Google (NASDAQ:GOOG), and Amazon (NASDAQ:AMZN) in the world of smartphones, tablets, and cloud computing.

However, J.P Morgan analyst Mark Moskowitz wrote in a note to clients, “In our view, a courageous move would be for H-P to sell the PC and printing businesses to help pay down debt and reset the company’s revenue base, setting the stage for renewed growth over the long term.”

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