The technology company's market performance Friday summed up investors' mood on Hewlett-Packard: neither panic nor excitement. Shares of HP fell 8 cents; or viewed another way, the company's stock hardly budged after the company reported third-quarter revenue that was in line with its warning in July.
Thursday's third-quarter conference call did little to change existing perceptions of HP. Skeptics stuck to their questions and fears:
Merrill Lynch's Thomas Kraemer: "Some positives in the quarter, but we still have concerns."
J.P. Morgan Securities' Daniel Kunstler: "The company is simply not equipped to weather both a clampdown in IT spending and pricing pressures resulting from its commodity oriented product mix."
Prudential Securities' Kimberly Alexy: "We do not see near-term catalysts that will rejuvenate HP shares."
Goldman Sachs' Laura Conigliaro: "All of HP's businesses remain very weak and under continuing pressure."
ABN AMRO's Bill Shope: "Despite the company's progress, we believe that there are still significant execution risks in the HP story."
SG Cowen Securities analyst Richard Chu was as upbeat as anyone could be after HP's last few months. Chu believes HP's printing business, despite possible losses of market share to Lexmark, remain strong. And he sees the company's computing systems business improving.
"Fundamentals for HP have moved into a bottoming phase," Chu wrote Friday. "Accordingly, while visibility seems limited, we would remind investors that year-over-year revenue comparisons are likely to start improving by the first quarter."
Salomon Smith Barney's John B. Jones reiterated a "buy" rating on Hewlett-Packard, which shouldn't surprise anyone, given that he issued a note earlier this week criticizing a Barron's article that urged HP to give up on all its businesses except printers.
Barron's, long known for sharply worded pieces that ruffle executives, flatly dismissed HP's PC business as a "no hope" undertaking. HP executives on Thursday strongly disputed the notion that the PC business is a lost cause.
"It has been a good performer for us," said Carly Fiorina, HP's chief executive and chairman for almost two years. "We think in more normal times it will continue to be a good performer for us and it is related in many ways to other solutions that we provide."
Analysts pointed to HP's top ranking in home PC sales, No. 2 spot in notebook sales and top five ranking in PC sales overall, as market positions that are too strong to be abandoned. "It's not like they're number eight," said George Elling, analyst with Deutsche Bank Alex Brown. "They're an important player."
Elling might be the biggest HP bull of all, with a "strong buy" rating on the company while many of his colleagues stick with the equivalent of "hold" advisories. Despite the criticism recently leveled at Fiorina and her management team, Elling believes Hewlett-Packard has accomplished the most important feat of all: surviving the downturn. "They're doing the things they have to do in this kind of environment," he said.
Hewlett-Packard's printing business, though disappointing many observers, at least generates enough income to keep HP profitable as a whole so far this year. The PC business has improved its market share since Fiorina took over as chief executive. And the services business, while far behind the scope of rival IBM, has been growing.
But the decline in technology spending over the past few quarters killed any chance of turning HP around this year, Elling said.
"She certainly could be the one to do it," he said. "We can't grade her yet. It's easy, people like to trash people...but that's being rash."
Fund managers' view of HP hasn't changed much in recent months. In the second quarter of this year, institutional ownership of HP dipped to 51.5 percent, down just 0.42 percent from the end of March, according to Market Guide, an online financial information service. And much of that decline came as mutual funds and investors retreated from technology stocks in general.
Like Elling, some fund managers want to see how Hewlett-Packard does when the overall economy doesn't stink.
"I don't think turning around HP is something that happens overnight," said Bruce Raabe, chief investment officer for Collins & Co., for which Hewlett-Packard is one of the largest tech stock holdings. "Carly Fiorina really hasn't been the CEO that long. Plans take time, and the results take time."
While some critics believe HP remains too unfocused, with ambitions in too many businesses, fund manager Rose Papp believes that m?lange of units is an HP strength. As with IBM, Hewlett-Packard's businesses boost each other, said Papp, co-manager of the Arizona-based Papp Stock Fund, whose only computer hardware stock is HP.
Printers and technology services often open doors for HP to sell other products such as servers and PCs, Papp said. And having a broad line of businesses prevents HP from suffering if one segment suffers a downturn, she said.
Fiorina deserves a chance to make the most of HP's swath of offerings, Papp and others said. "My problem with Hewlett is that they can never seem to get everything going at one time," Papp said. "I'd like to see, when IT spending comes back, if they can keep the whole company going at the same time."