What happened

Shares of IT services and network security veteran Hewlett Packard Enterprise (NYSE:HPE) fell 39% in the first half of 2020, according to data from S&P Global Market Intelligence. HPE was arguably overpriced at the start of 2020, and the inevitable correction was accelerated by two disappointing earnings reports.

So what

The first-quarter report in March showed early signs of COVID-19 disruption. HP Enterprise saw sales fall 9% year over year amid virus-related component manufacturing issues. Three months later, it dropped 12% in a single day as the second-quarter report fell short of analyst estimates across the board. This time, sales dropped 16%. The COVID-19 problems included both manufacturing challenges and slower orders from enterprise-class customers.

A red charting arrow squiggles its way downward.

Image source: Getty Images.

Now what

In an attempt to encourage big-ticket clients to place more orders for computer systems, HP launched a delayed-payment purchasing plan in April with $2 billion of committed capital. Share buybacks have been suspended, but HP Enterprise continues to pay out its regularly scheduled dividend with an effective yield of 5.4% at today's stock prices.

The stock trades 49% below its annual highs right now. Wall Street is sending mixed messages on HPE's valuation as you can pick up shares for 146 times trailing earnings but just 6.3 times forward estimates. It's also priced for absolute disaster at 0.7 times book value. Some would call that a bargain-bin value. I'm not sure that HP Enterprise will find a path to full recovery, and I will gladly watch this agonizing turnaround story from the sidelines.