Full 360-Degree H-P Earnings Preview (HPQ, DELL, CSCO, AAPL, IBM)

Hewlett-Packard Co. (NYSE: HPQ) is set to report earnings after the close.  As this is the first report with Meg Whitman on as CEO and with the shenanigans that took place around Leo Apotheker’s failed “keep or dump” strategy, today’s report has to really be considered around the long-term vision rather than the actual earnings report.

We just saw a mixed report from Dell Inc. (NASDAQ: DELL) last week, and they are not in the midst of a turnaround in the same manner that H-P is in.  All things considered, it would seem a shoe-in that H-P will be a disappointment on the earnings.  But…  This is setting itself up to be a contrarian’s dream.  How it will offer guidance is unclear until we know how Meg Whitman wants to communicate.

The automatic expectation from H-P’s firing of Apotheker was that the numbers were going to be awful. So, the big question boils down to the other side of “what if”… What if H-P somehow manages to report earnings which really aren’t all that bad?

Estimates from Thomson Reuters are $1.13 EPS and $32.06 billion in revenue; next quarter estimates are $1.11 EPS and $31.44 billion in revenue. We will be looking at the company’s comments around manufacturing problems for drives for its PC around the flooding in Thailand as well as any extra divesting developments on the WebOS left over from Palm.

H-P is down over 4% at $26.65 due to a weak market and the 52-week trading range is $21.50 to $49.39.  Shares have effectively bounced by 25% off the lows from September to October.  Unfortunately, that is a large bounce for a company where the turnaround has so far only been discussed in general but not shown in any detail.

With the datacenter war taking place with Cisco Systems, Inc. (NASDAQ: CSCO) and with Apple Inc. (NASDAQ: AAPL) just starting to consider how to penetrate the enterprise market, H-P has a fight ahead of it.  Also imagine this… Had this been 18-months ago, Warren Buffett might have chosen H-P shares as the tech-buy over International Business Machines Corporation (NYSE: IBM) for the huge stake.  Either way, we know what happened there now.  Just to think about how much of a mess this is, the ultimate decision to not spin off its PC unit appears to ultimately be because the charges and costs with such a spin-off would be too high to justify the effort.  How reassuring is that?

Again, our take is that the last quarter has to almost be written off.  If somehow it can show that business did not suffer as much as the headlines (and fear) might have indicated, then that would almost certainly create a more positive stance.  Right now it seems as though traders and investors are st

The chart is showing support down around $25.24 at the 52-week moving average.  The 200-day moving average does not currently come into play until $34.03, so we would not expect to come into play for weeks or even more.  Thomson Reuters has a consensus price target objective of $30.69 for H-P.

Oh, and maybe just one suggestion since there is a new sheriff running H-P town… How about considering a new logo?  PCs are not the excitement they were in the 1990s, but HP takes the cake for lame logos on its retail products.  Just a thought.

JON C. OGG