Resultados da HP depois do fecho

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HP: Follow the Hurd

Wall Street is eager to hear from HP's new CEO Mark Hurd when company reports Tuesday.

May 16, 2005: 5:08 PM EDT
By Paul R. La Monica, CNN/Money senior writer

NEW YORK (CNN/Money) – Will the honeymoon for new Hewlett-Packard CEO Mark Hurd continue after the company reports its quarterly results Tuesday?

Analysts expect HP to report second-quarter earnings, excluding certain charges, of 36 cents a share, up from 34 cents in the same period last year. Sales are forecast at $21.3 billion, a 6 percent increase from a year ago.

As for guidance, analysts are predicting that HP (Research) will earn a pro-forma profit of 32 cents per share in its fiscal third quarter, which ends in July, and that the company will report revenues of $20.4 billion.

But those numbers may take a back seat in terms of significance.

That's because this is the first earnings conference call for Hurd since he took over on April 1 and Wall Street is more interested in hearing about Hurd's strategy to fix HP's many problems.

Arnie Berman, senior technology strategist with research firm CreditSights, said that Hurd might wind up reducing near-term forecasts for the company in order to set up relatively low expectations.

Even if the company's second quarter-results and third-quarter guidance isn't great, Wall Street may cut HP some slack as long as there is some hope for the future.

"People might be more forgiving if there is a miss since they would chalk this up to being a transitional quarter," said Michael Cohen, director of research with Pacific American Securities. "Investors are looking for something that will make a difference in the long run."

Here are some of the issues facing Hurd that analysts are likely to grill him about:

Can HP make more money from its struggling PC division or will it, like IBM (Research) did, need to sell it off?

How much cost cutting will need to be done in HP's so-called Technology Solutions business, which sells servers, storage and software and provides consulting services to large corporate customers?

In the server market, can HP do a better job of positioning itself against IBM on the high-end and Dell on the low-end?

Finally, what does Hurd plan to do to get HP's printing business back on track? Printing and imaging is, by far, HP's most profitable division but margins have been falling lately due to price cuts. HP has reduced prices to fend off challenges from Dell (Research), Lexmark (Research), Canon (Research) and Epson.

Wall Street optimistic...but for how long?
So far, Wall Street has taken a shine to Hurd, formerly the CEO of automated teller machine and cash register maker NCR (Research). He is known as a hands-on, details-oriented executive who helped restore NCR's profit growth (and stock price) during his two-year stint as CEO.

Since HP announced in late March that Hurd was replacing Carly Fiorina, shares of the Dow component have risen about 4 percent.

That's more than respectable considering that Dell, which reported blowout fiscal first-quarter results last week and gave a bullish outlook, is up about 2 percent during the same time frame. What's more, IBM and Lexmark have both plunged nearly 20 percent due to disappointing first-quarter earnings reports.

Analysts will be particularly interested in finding out if Hurd plans a major round of layoffs at HP. Hurd was known for aggressive cost cutting at NCR and he has already announced job cuts in HP's printing business.

Richard Chu, an analyst with SG Cowen, wrote in a recent report that he would not be surprised if Hurd soon announced upwards of 10,000 job cuts in the Technology Solutions business, which has struggled to make money on a consistent basis since HP merged with Compaq in 2002.

There has also been some speculation about whether Hurd would want to write down some of the goodwill related to the Compaq acquisition.

Goodwill includes the value of intangible assets such as brand name and customer reputation and companies often take charges to reduce it after a merger does not turn out to be as successful as hoped.

Chu, argues, however, that the issue of an accounting write-off is "largely an irrelevant discussion" and that investors should focus on what Hurd has to say about costs.

Cohen said he hopes that HP, under Hurd, will also be able to lower expenses by taking a page from Dell's book and streamlining its manufacturing costs. Cohen said layoffs are not the only answer to HP's problems.

Berman said Hurd needs to do more than just give details of what fat he'd like to cut. He also has to give Wall Street an indication that he can also get revenues growing at a more robust pace.

"It will be disappointing if people didn't get more of a flavor for what he's planning to do. HP is caught in a vice between Dell and IBM," Berman said. "I am not envious of Hurd because the job he has to do is brutal. The company is in is a strategic muddle."