So what happened?
During 2012, investors had very little confidence in the company, and the turnaround story was just beginning. But as the year came to an end, the company posted some decent results, and there were signs that the ship was heading in the right direction. The positive sentiment rolled into 2013, and new investors began piling into the stock and running the price higher.
That all ended when April started. Shares hit their 2013 high on the last trading day of March and have been on a downward slide ever since. The first week of April, Hewlett-Packard Company (NYSE:HPQ) lost 7.84% of its value, and one analyst may have hit Hewlett-Packard Company (NYSE:HPQ)’s problem on the head. In an April 4 report, Bill Shope from Goldman Sachs Group, Inc. (NYSE:GS) predicted that shares would fall 31% from their closing price that Monday of $23.31. He argued that while the restructuring of the company would help, he thought any gains to be made were going to be wiped out by weaknesses in other areas of the company’s business.
Since Shope made his prediction, shares have fallen $3.75, or 16.08%. Shope’s calls are looking pretty prescient right about now.
Two weeks ago, we saw an IDC report warning that personal computer shipments fell 13.9% in the first quarter — the largest decline IDC has ever recorded — while analysts were expecting a drop of just 7.7%. IDC cited weak demand for PCs and unfavorable results for Microsoft Corporation (NASDAQ:MSFT)‘s Windows 8. Back in the fall, when Windows 8 hit the market, many PC experts said the new operating system would pull the industry back from its recent slump, as consumers refreshed their software and hardware. That refresh cycle clearly hasn’t taken hold yet.
Another unit of Hewlett-Packard Company (NYSE:HPQ)’s business that may also begin showing weakness is the server side. The company has received some accolades for its newest Moonshot server line, with some saying the servers are ahead of their time while they take up 80% less space and use 89% less energy. CEO Meg Whitman calls the servers evolutionary and innovative, with the potential to begin a new revolution. I’m not so sure. I think this also may be an area in which the company will soon begin showing weakness.
Consider that the mother of all server companies, International Business Machines Corp. (NYSE:IBM) just announced quarterly earnings this past week and missed on the top and bottom lines. It was the company’s first earnings miss since 2005. The main reason for the miss was weak demand in the IT hardware segment, and analysts think this is a bad sign moving forward for the whole industry, not just for International Business Machines Corp. (NYSE:IBM).
Lastly, the Blackstone Group decided this week to pull its bid to take Hewlett-Packard Company (NYSE:HPQ)’s closest competitor, Dell Inc. (NASDAQ:DELL), private. While the reasons for the about-face haven’t been revealed, and although the decision doesn’t point to any one business unit in particular, it does say a little about the business as a whole.
Hewlett-Packard Company (NYSE:HPQ) needs to be hitting on all cylinders, and with PC sales slumping, that doesn’t seem to be happening now. In fact, there’s evidence suggesting it won’t be happening later, either, as this industry continues to evolve.
The article HP’s Turnaround Story May Be Coming to an End originally appeared on Fool.com and is written by Matt Thalman.
Fool contributor Matt Thalman owns shares of Microsoft. The Motley Fool owns shares of IBM and Microsoft.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
