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HP Q4 earnings: Not-as-bad-as-expected doesn’t equate a turnaround

Michal Lev-Ram
By
Michal Lev-Ram
Michal Lev-Ram
Special Correspondent
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Michal Lev-Ram
By
Michal Lev-Ram
Michal Lev-Ram
Special Correspondent
Down Arrow Button Icon
November 29, 2013, 3:00 PM ET
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FORTUNE—Hewlett-Packard (HPQ) has plenty to be thankful for this holiday weekend. The company’s fourth-quarter results, reported earlier this week, came in better than expected. HP’s revenue for the quarter, $29.1 billion, beat Wall Street analysts’ projections, as did earnings. As a result, shares of the company soared nearly 10% the day after CEO Meg Whitman’s quarterly earnings call with investors.

But unfortunately for HP, the future may not be so bright once Thanksgiving passes. To put things in perspective, the company’s revenue—while higher than expected—still dropped year-over-year. (For the third year in a row, I might add.) Nearly every one of its business units declined in this most recent quarter; HP’s Enterprise Group was the one bright spot, up 2% from last year. The company has already shed 13,000 jobs in the last fiscal year, and will likely cut several thousand more in the coming months. CEO Whitman’s plan to focus the company on long-term growth businesses like software and cloud services has yet to translate into significant improvements or growth. In other words, a slightly-stronger-than-expected fourth quarter in no way means that the company’s turnaround strategy is working.

Of course, HP had no problem spinning its less-than-mediocre results into a positive.

“Through improved execution, strong cost management, and with the support of our customers and partners, HP ended fiscal 2013 on a high note,” Whitman said in a release issued on Tuesday. “Our Q4 results demonstrate that HP’s turnaround remains on track heading into fiscal 2014. While we still have much more work to do, our business units and their core assets are delivering on HP’s strategy to help customers thrive by providing solutions for the New Style of IT.”

To be fair, Whitman is only two years into her five-year plan. And yes, declines were smaller in this most recent quarter. But it’s not yet clear how HP will bolster not only top-line growth but profits, in light of aggressive cost-cutting in its product lines and slumping sales of PCs and printers, still an important source of revenue for HP. Morale has no doubt improved since Whitman stabilized the company’s corporate ranks, but hiring and retaining talent could still be an issue—luring engineers is harder than ever in Silicon Valley. So while Whitman can sit back and enjoy her turkey leftovers this weekend, come Monday the holiday—and fourth quarter—haze will likely wear off.

About the Author
Michal Lev-Ram
By Michal Lev-RamSpecial Correspondent
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Michal Lev-Ram is a special correspondent covering the technology and entertainment sectors for Fortune, writing analysis and longform reporting.

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