HP lifts itself by its own bootstraps

It looks like whatever its new CEO Meg Whitman is doing at HP to turn the outfit around is starting to work.

The maker of expensive printer ink raised its 2013 earnings outlook after quarterly results beat low expectations.

Analysts believe that Whitman’s turnaround plan helped offset falling PC sales by boosting enterprise computing services.

It was not all good news, in fact, if the company had not been in Dire Straits playing back up for Mark Knopfler in the first place then people would be saying the announcement was rubbish.

HP’s fiscal second-quarter profit fell 32 percent, but since the cocaine nose jobs of Wall Street had expected a lot worse, it all looked like a victory.

HP shares gained 14 percent after the company projected full-year earnings per share of $3.50 to $3.60, raising the lower end by 10 cents, and fiscal third-quarter profit that topped analyst estimates.

Still it is being seen as a feather in the cap of Whitman, who took the helm at the world’s largest PC maker more than a year ago.

She wants to recapture some of HP’s former strong growth. To be fair she did say the process could take years.

HP’s chief financial officer Cathie Lesjak was so excited when she talked to Reuters that she mixed her metaphors and came up with something unpleasant. She said that this was a “another good deposit on the road to our turnaround here”.  When we were living in Slough there was a homeless fellow who regularly left a good deposit on the road next to the roundabout.

Enterprise services and printing units are “probably a little bit ahead,” she said, adding the two businesses helped drive the company’s gross margin improvement during the quarter.

HP’s net income fell to $1.08 billion from $1.59 billion a year ago.

Other analysts were not so certain that things were getting great at HP. Tom Reuner, principal analyst at Ovum said that HP’s Q2 2013 financial results are a reminder that, as its CEO Meg Whitman is reiterating, that the restructuring will take a further four years.

Slightly beating HP’s guidance should not be misunderstood as a turnaround but as an improvement in its operational efficiency.

“Margin improvement and an improved guidance for the rest of the year are a sign that the restructuring measures are starting to show results. Equally an improvement in Printing and Enterprise Services is contributing to a stabilising of HP’s performance,” he said.

The company needs to refine its communications around how it will differentiate around these industry trends. The structural challenges around the low margin PC business and the transformation to a software and services led organisation still persist, Reuner said.