What's Wrong With HP Today?

Hewlett-Packard (NYSE: HPQ  ) just took a much-needed step toward a healthier business: Chairman Ray Lane and two other directors stepped down from the board of directors. Lane will remain a director but without the chairman's leadership duties. Banking veteran G. Kennedy Thompson will leave the board entirely in May, alongside John Hammergren, who is also CEO of health care information company McKesson. Activist investor Ralph Whitworth serves as chairman until further notice. No replacements have been named for the two outright departures.

Investors have been calling for something like this to happen. Each of these three directors earned less than 60% approval ratings in HP's recent annual shareholder meeting, while every other director won more than 90% "yea" votes. This is the kind of "vote of no confidence" that drove Michael Eisner out of Walt Disney nearly 10 years ago. When you're running for office unopposed, you really should expect far higher approval ratings. Lane and company are simply following the will of their shareholders.

Moreover, HP's board has long been seen as a liability. Corporate-ethics expert Nell Minow quipped that these people might as well carry a banner saying, "We have no idea what we're doing." That was two years and two CEOs ago -- not to mention the whole Autonomy debacle. A wholesale housecleaning is very much in order.

And yet HP shares are down 1.6% on the news. It's the third-worst performer on an already weak Dow Jones Industrial Average (DJINDICES: ^DJI  ) today. Financial giant American Express (NYSE: AXP  ) plunged 2.3% on weak payroll data, which will put direct pressure on the company's top line. Cisco Systems (NASDAQ: CSCO  ) fell 2.2% due to terrible earnings at rival F5 Networks; the entire networking sector is suffering today, and not even mighty Cisco is immune to sectorwide swings.

There are plenty of other losers on the Dow today, but only these two fared worse than HP.

Why, then, is HP plunging on what looks like good news for the long-term health of the company? Well, change is always scary. The action may have underscored HP's shaky situation to some investors. Maybe the changes didn't go far enough; Lane is still on board, and his companions will stay around for another month.

The real reason is probably "all of the above." That disgraceful shareholder vote set the stage for today's action, but it still comes as a shock to the system.

Will CEO Meg Whitman pair up with interim chairman Whitworth and really shake HP up? I hope so. This is their chance to catch up with a rapidly changing market. The current strategy sure isn't working.

The massive wave of mobile computing has done much to unseat the major players in the PC market, including venerable technology names like Hewlett-Packard. However, HP is rapidly shifting its strategy under Whitman's leadership. Does this make HP one of the least-appreciated turnaround stories on the market, or is this a minor detour on its road to irrelevance? The Motley Fool's technology analyst details exactly what investors need to know about HP in our new premium research report. Just click here now to get your copy today.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2348744, ~/Articles/ArticleHandler.aspx, 10/1/2016 3:19:36 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 6 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 5:01 PM
^DJI $18308.15 Up +164.70 +0.91%
HPQ $15.53 Up +0.14 +0.91%
HP CAPS Rating: ***
AXP $64.04 Up +0.67 +1.06%
American Express CAPS Rating: ****
CSCO $31.72 Up +0.33 +1.05%
Cisco Systems CAPS Rating: ****