By Michal Lev-Ram
November 22, 2011

FORTUNE — On her first earnings call with investors since taking the helm last September, Whitman repeatedly said HP would get back to “business fundamentals” in 2012. What exactly does that mean? Fewer distractions, for one. It also means no big acquisitions like the $10 billion-plus purchase of enterprise software maker Autonomy.

“We cannot continue to rely on acquisitions alone at HP,” Whitman said on Monday’s call. “It’s just the wrong thing to do. We’ve got a lot of runway with our own internal R&D capability, if we run it right and invest in it right.”

The decision to avoid any big buys in 2012 seems solid enough. HP (HPQ) took a lot of flack when it announced it would buy Autonomy last August. Many investors just didn’t feel the hefty price tag was justified. Add to that a profit decline in the most recent quarter (caused in part by charges related to HP’s failed WebOS purchase) and a rising debt load and you’ve got good reason to tighten the purse strings.

Whitman’s conservative approach will come as a relief to most investors. But steering clear of big, bold acquisitions could backfire. While she made the right call in opting to keep the company’s PC business, HP still needs to bulk up its software portfolio to compete with the likes of IBM (IBM), Oracle (ORCL) and SAP (SAP). Pouring more money into R&D won’t give HP the kind of boost it needs in this market, as it will likely take several years to see a return on internal investments. In the meantime, rivals with ample cash could buy themselves even more of a head start in enterprise software. Ousted CEO Leo Apotheker might have done a lousy job communicating his ideas, but he may have had the right idea — steering the world’s largest computer maker towards a more profitable software and services business model.

To be fair, Whitman did say HP would consider making two or three smaller software acquisitions in the coming year, but nothing on the scale of another Autonomy. “If there is a great acquisition in the $1 billion range, maybe we will take a look at it,” Whitman said on Monday. “But we’ve got to be sure that it fills a hole, that we don’t pay too much for it and that we are financially disciplined about it.”

Regardless of exactly how many acquisitions the tech giant ends up making in 2012, conserving cash is a probably a good starting point for rebuilding HP and making nice with investors. But it’s just a starting point. HP has been plagued by boardroom scandals, executive shuffles and a lack of clear leadership. In the fourth quarter, it suffered declines in core businesses like PCs and printers. Even worse, morale at the company has been down for years.

Stability and financial discipline will likely be a good thing for HP. But if its newfound conservatism lets competitors get ahead, the going may get even tougher for Whitman in 2012.

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