My inbox is brimming with talk of restructuring at Hewlett-Packard
During the tenure of ousted former CEO Carly Fiorina, restructuring meant consolidation. For example, in January, the cash-gushing printing and imaging business picked up the hardly-making-a-buck personal systems business (home to HP's sizable personal computer group). HP wanted a proven profit leader to spin his magic over the PC operations.
Six months later, new HP CEO Mark Hurd has re-separated the two operations and appointed former Palm
The same theme was played out in separating marketing and sales and, last week, when HP's Information Technology group was separated from Global Operations. Hurd hired Randall D. Mott, a seasoned executive from Dell
While much of my email is focused on the potential sale of the PC or printer business -- or both -- investors should look at these moves for what they are. HP's new CEO wants proven leaders in their respective fields to put muscle to his future vision for HP. It makes sense, since it enables executives to concentrate their efforts.
The next level of restructuring, when it comes, will have two components. Provided it goes as I expect, the least controversial will be a balance sheet writedown of goodwill to reflect the dismal results of the 2002 merger with Compaq.
Most controversial would be layoffs. For a company that invented many management concepts and maintained a unique culture, old-school slash-and-burn layoffs -- if they happen -- will be taken very hard. Investors may look at the expected dollar savings but fail to examine the potential effects on employee morale on a longer-term basis, particularly if the company moves to a more top-down approach to business. Remember, this is a company that went public in 1957 and gave all employees with six months of service an automatic stock grant.
So, is it time to buy HP?
The stock's rise over the last three months probably already reflects investors' view on a restructuring, as a way to get HP's weak 5.5% operating margins rising. But that optimism, in this observer's opinion, will wane as time passes and investors wait to see what really happens. Though I think HP is in the process of some meaningful advances, I still think it's too early to buy HP, because it is impossible to assess how the company will turn restructuring into success.
Dell and Palm are Motley Fool Stock Advisor recommendations.
Fool contributor W.D. Crotty does not own shares in any of the companies referenced in this article.
