Glimmer of hope for HP as turnaround kicks in

It's not often that a drop in profits is met with a sprightly jump in share price. But that's what happened to HP today.

by Gabriella Griffith
Last Updated: 05 Aug 2014

But although the computer behemoth’s second quarter profits fell by 32% to £731m, the results were still better than expected. It seems the anticipation of recovery has created a positive mood among investors - HP shares were up 14% following extended trading in New York having already jumped up 49% so far this year. 

It just goes to show that ‘not as bad as it might have been’ is the new good, at least when, like HP, you're in the throws of a five-year turnaround and everyone is waiting for the worst to happen. 

But PC sales are still on the wane as consumers continue to flock to the hallowed halls of Apple and Samsung to buy tablets and smartphones. According to IDC research, global PC revenues have dropped by a fifth year-on-year.  Having taken the helm of the company just over a year ago, HP's would-be saviour and CEO Meg Whitman has warned that the process of restoring the Silicon Valley legend to its former glory could take some years.  

"The patient is showing more signs of recovery, but we still have a lot of heavy lifting to do," a resolute Whitman told the FT.

That ‘cure' has already claimed casualties – the cost-cutting drive has involved the loss of thousands of jobs at HP as it aims to slash headcount by some 27,000 employees. 

Whitmans’ big wheeze to save the firm is to bring out a range of devices designed to use different operating systems and processors. She has already suggested the development of an HP version of Google's minimalist Chromebook, the laptop for the cloud generation. No doubt to be followed by its own tablet, too.  

Then of course there’s the ongong saga of Autonomy-gate. HP's hasty acquisition of Mike Lynch’s Cambridge-based technology firm in 2011 set the company back $11.1bn. But a scandal over 'accounting improprieties' forced the company to write-down £5.7bn – not an easy crater to crawl out of. 

Meanwhile HP's biggest rival in the PC market, Dell, has sniffed opportunity in its oppos’s misfortune and has slashed its prices in a bid to score market share. 

Dell of course is not without its own problems, so Whitman is playing it cool and could yet come out smelling of roses: "Dell cratered their earnings by 75 per cent and were very aggressive in pricing, and we chose to walk away from some of those deals because we wanted to preserve our operating margins," she said.  

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