The Street today weighed in on Hewlett-Packard‘s (HPQ) “Discover” conference going on in Las Vegas the last few days, the company’s annual event for IT managers and for HP’s partners. The event drew about 10,000 attendees.
CEO Meg Whitman was a keynote yesterday, and this was the first time the investment community was invited to attend the event.� There there was no financial update to the company’s previous outlook, although Whitman reportedly sounded confident that the company can hit its target this fiscal year for $4.05 to $4.10 per share in profit.
The shares today closed up 67 cents, or 3.1%, at $22.35.
Some good interviews have come out of the event, including one by Arik Hasseldahl of AllThingsD last night.
Hasseldahl writes that Whitman made clear that she would not leave HP for a cabinet position with fellow Republican Mitt Romney, were he to win the presidential election, as that would mean leaving HP at a time “when it needs consistent leadership.”
And The Wall Street Journal‘s Ben Worthen yesterday sat down with Whitman as well.
In that interview, Whitman told Worthen the company was at the beginning of a four- to five-year turnaround effort. When asked how she would succeed when the “track record of the CEO job at HP isn’t great,” Whitman said she would provide leadership “on a strategy that makes sense.”
ISI Group’s Brian Marshall, who has a Buy rating on the shares and a $34 price target, writes that the company’s “tone” was consistent at the event, with management sounding “confident in its product competitiveness and long-term strategy while mindful that turning around a ~$125bil+ annual revenue business with over 300,000 employees will take time.”
Marshall notes the “positive tone” from the company regarding HP’s storage business, writing, “In our tour of the demo floor, HPQ management suggested strong momentum in its storage business with its 3Par and StorOnce portfolio offsetting declines in Enterprise Virtual Arrays (EVA).”
Marshall was also encouraged by the discussion of recent structural changes, especially the merging of the PC business and HP’s services arm:
Perhaps the largest change in our view is the combination of the PC business (PSG) with printing (IPG) which is benefitting from 1) a better customer experience as complementary products are sold together, 2) a significant increase in sales coverage (~30% more direct enterprise accounts for IPG), 3) supply chain leverage (e.g., logistics, transportation routes from China to Europe, etc.) and 4) service and support leverage (e.g., customers receiving unified support for PCs and printing). In our view, changes in the Services business also offer significant potential, but will take time. We believe it is highly likely that Services revenue shrinks over time, but becomes more profitable as it walks away from low-margin contracts and focuses on higher value services. We believe the Services organization is also heightening its focus on more optimal, �leaner� delivery models that will increase utilization rates.
In a somewhat less enthusiastic vein, Jayson Noland of RW Baird reiterates a Neutral rating today, and cuts his price target to $25 from $28 to reflect macroeconomic concerns. He writes that “management is taking appropriate restructuring actions following what was essentially a disastrous 2011 for the company.”
However, “We don�t expect to see a sustainable fundamental inflection point in the near term and view an incrementally challenging macro-economic environment as an additional headwind.”
Likewise, Barclays Capital‘s Ben Reitzes today reiterates an Equal Weight rating on HP shares, writing that the event will probably be seen as a “modest positive,” with “Meg Whitman in control.” He still wants to see more “evidence of a sustainable turnaround.”
“We did not detect any change in tone as demand remains challenged, particularly in Europe,” writes Reitzes.
“We believe European demand and currency headwinds could weigh on HP�s revenues over the next few quarters, as 35% of the business is exposed to the EMEA region.”
And Kulbinder Garcha of Credit Suisse reiterated a Neutral rating and a $30 price target, writing that Whitman is “gradually making her impression on the company,” which is “reassuring and we see the potential for upside over the very long term.”
“However our concern remains that with so many business lines under pressure, organic growth could be challenging LT.”
BMO Capital‘s Keith Bachman reiterated a Market Perform rating and a $27 price target, writing that “We like the valuation of HP, and new management’s strategy, but don’t see a clear catalyst.”
Although macroeconomic conditions are becoming tougher, he thinks it’s unlikely that trouble in Europe will prevent HP meeting its EPS estimate for the year, barring some major degradation on the continent.
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