Shares of Hewlett-Packard (NYSE: HPQ ) hurtled nearly 14% higher overnight thanks to a surprisingly solid second-quarter report. Adjusted earnings fell 11% year over year to $0.87 per share, but outpaced both analyst targets and management's own guidance in the process. HP missed analyst estimates on the top line by a nose, delivering sales of $27.6 billion where Wall Street expected $28.1 billion. But investors clearly focused on rewarding HP for the bottom-line beat -- not to mention that CEO Meg Whitman's earnings guidance for the second half of 2013 also topped analyst estimates.
HP achieved all of this in spite of plunging PC sales. The personal systems division saw sales in a 20% year-over-year freefall, spearheaded by a 29% decrease in consumer systems. That's another data point to confirm the death of the PC, at least in terms of PCs being the defining form of personal computing. Tablets and smartphones are doing real damage here.
But that's OK, because HP is finally getting its groove on in the mobile market. Whitman is excited about marrying her personal systems strategy to Google (NASDAQ: GOOG ) in a big way.
HP just introduced a range of mobile products powered by Google's operating systems, including one budget-friendly Android tablet, one high-end Android slate that converts into a netbook, and HP's first Chromebook product. "Early signs of interest in this product are encouraging," Whitman said. "If we have the right product priced right, the channel still loves HP and they want to sell in our product, whether it's to small businesses, medium-sized businesses or the enterprise and frankly, having Android products here helps a lot."
I'll keep a close eye on how HP's Android and Chrome products do in the market. Running a fairly pure Android shop sure hasn't hurt Samsung any, so maybe HP can copy the Korean vendor's mojo by leaning closer to Mountain View.
Then again, all-in bets like these are always risky. HTC loves Android, but the market doesn't love HTC back. LG sings the same sad song. And do I need to remind you how far Nokia (NYSE: NOK ) has fallen since hitching its wagon to a single horse named Microsoft (NASDAQ: MSFT ) Windows Phone 8? Becoming Mr. Softy's preferred partner was supposed to be a game-changing turnaround play for Nokia, but the Finns are still searching for the first sign of market traction.
Neither Nokia nor Microsoft are celebrating how this daring partnership turned out. At this point, I wouldn't be surprised to see Nokia jumping ship to the proven Android platform, leaving Microsoft adrift. But even that strategy shift might be too little, too late for Nokia -- just as it could be for HP. And either way, Microsoft can't seem to find any room for another platform between the Android and iOS behemoths. Maybe it's time for Redmond to give up on the mobile market, other than building apps like Microsoft Office for the reigning kings of mobility.
And Nokia had an advantage that HP can't match -- a leading global market share in the cell phone sector. HP is starting from scratch, having punted on earlier attempts like the ill-fated Palm acquisition. So I'll demand some real mobile results before buying into Meg Whitman's rose-tinted view of that market. HP remains a bearish bet in my CAPS portfolio, even after this encouraging report. I'm still looking for real change to the company's outdated business model.
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's rapidly shifting its strategy under the new leadership of Whitman. But does this make HP one of the least-appreciated turnaround stories on the market, or is this a minor blip 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.