Shares of computing giant, and Dow component, Hewlett-Packard
I'm not exactly shocked by this sad turn of events. Preparing for this report, I told you that HP would disappoint again. The company is chasing too many markets at once under CEO Meg Whitman, making it impossible to dominate any of them. "HP's margins are falling to pieces," I said. "Sales are slowing down in spite of big, splashy acquisitions. That's a terrible combination."
Proof, meet pudding
That's exactly what happened again this quarter. Sales fell 5% year over year to $29.7 billion, just below the analyst target at $30 billion. Adjusted earnings swooned 9%, landing exactly at the $1.00 platform where HP's updated guidance painted its crosshairs.
Whitman didn't even try very hard to put the usual positive spin on these numbers. Instead, she pointed out that HP is going through a "multi-year turnaround" and making "decent progress." Not "fantastic" or "ahead of schedule, under budget," but just, you know, "meh."
Where's the silver lining?
The few segments showing any promise in the form of rising sales fell squarely on the enterprise side. This included networking equipment, commercial-grade printer systems, and enterprise software. Operating margins fell across the board, again excepting the printing group, and HP's oft-overlooked financial services.
Under Whitman's rule, HP continues its eternal quest to carbon-copy IBM's
The road not taken
If Whitman really is serious about her Big Blue game plan, she needs to dump the doomed consumer assets into a separate company, or sell them to the highest bidder. But that's not happening.
When asked about potential spin-offs on this earnings call, Whitman held the door open for small sales, but firmly locked to bigger deals: "They wouldn't be big divestitures by any stretch of the imagination, but we have lots of little initiatives buried throughout this company," she said. So just forget that big idea, okay?
I wouldn't be surprised if HP lost its seat at the Dow 30 table soon. This is hardly the blue-chip of yore, but a shrinking and weak competitor amongst far stronger rivals. The 2.7% dividend yield may look tempting, but is simply a side effect of sliding share prices. There are far stronger income generators available, such as The 3 Dow Stocks Dividend Investors Need. Grab that report while it's still free, Fool.
Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Cisco Systems, International Business Machines, and Oracle. Motley Fool newsletter services have recommended creating a synthetic long position in International Business Machines. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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