When former EBay (EBAY) head Meg Whitman became CEO of perennially troubled tech giant Hewlett-Packard (HPQ) she had two goals. First, stop the bleeding. Second, come up with a plan to make HP matter again. Today marks the end of her first year on the job and it's unclear either goal has been accomplished.
To be fair Whitman took on a herculean task. She was the 7th CEO at HP since 1999, including temps. During that rocky decade HP arguably made more terrible acquisitions than any company in history. Compaq for $25b, EDS for $14b (on which it took an $8b writedown), Palm for $1.2b and a software company called Autonomy for somewhere around $11b.
It would be impossible for Whitman to have done worse and she hasn't. At least not yet. Whitman has recently said that HP is working on a smartphone as a way to stay in the hardware business. There are even rumors that HP is considering a bid for Research in Motion (RIMM). Such a play would be consistent with HP's history but only in the worst possible way.
What Whitman has unquestionably done is streamline the company. Under her brief rein 27,000 employees have been cut in a move the company says will save $3-$3.5 billion by 2014. The cut is about 8% of HP's workforce and the other 92% shouldn't get too comfortable.
Is the the Stock a Buy?
If buying when others are fearful is a smart strategy, picking up shares of HP is genius. Alas, it's not that simple. Even after a 20% decline under Whitman and a 65% drop in the last 5 years, Jon Najarian of OptionMonster.com would take a pass on HP's stock. "I think it's still a value trap," Najarian says in the attached clip. The current board actually represents a degree of shareholder activism and simply shuffling divisions does little to move the ball.
"If I want to take a shot, I'd take a shot on Marvell (MRVL)," Najarian says. "Not that that's my favorite stock I'm just saying if you want to buy a beaten up tech stock that's one I'd focus on, not Hewlett."
Apple (AAPL), Qualcomm (QCOM), Corning (GLW) or "almost anybody but HP" has more appeal to Najarian. He doesn't think Whitman is going to ride the company all the way down but it's hard to find a bullish catalyst.
"Unless they make a real break through in services I think they're right here next year." he predicts.
