There Is Still Time For Hewlett-Packard's New Found Lease On Life

The last three years is something that Hewlett-Packard Company (HPQ) would want to write down as one of those dark moments in the history of the company. The company has lost about a half of its value since 2010, as its two major business units stagnated. The popularity and portability of tablets and smartphones has been a major obstacle to the growth of the PC industry over the last few years, and companies involved in the industry have suffered massively.

HP, which also produces printers has been in the receiving end, with the printer business stagnating despite being the company's cash cow over the recent past. But now, HP seems to have found a new lease on life in the form of corporate technology services. Now this is an area already dominated by Oracle Corporation (ORCL), International Business Machines (IBM) and Cisco Systems (CSCO), and HP wants to make it a major catalyst in its turnaround.

This though does not mean that HP is entering into an all new business, but rather, it is intending to focus more resources on this market as the PC industry continues to deteriorate. The question though is whether there is still time for HP to make any significant impact on the corporate technology services market, as there are already established players.

The tricky part with dealing with corporate clients as compared to direct consumers is that, as far as services are concerned, it may take a little bit of time before they can finally decide to switch partners. For the case of a consumer, it would have been a matter of trying the new service at the end of their current agreement. But for corporate clients, this might be too much of a risk to take.

In a recent statement, Meg Whitman, the CEO of HP, implied that she felt that the company should have ventured fully in the corporate technology services business earlier, an indication that it could be more challenging to make an impact now.

This time last year I was feeling HP was falling dangerously behind. Our business units la! cked a clear, crisp integrated strategy. Our innovation pipeline was there but wasn't being commercialized.

Long time business partners Microsoft Corporation (MSFT) and Intel Corporation (INTC) have also turned into competitors, as they capitalize on the disruptive technology to produce products that compete directly with HP's.

Nonetheless, HP is still by far one of the major forces in the computing industry, although Lenovo seems to be taking charge in the PC business. The stagnant printer business seems to be the one key strength to the giant PC maker, as several of its other units continue to face intense pressure from alternatives. Even more worrying is that HP did miss out on massive deals with customers on the notion that it couldn't deliver the goods. This has been one of the underlying drawbacks to the company's operations as rivals rushed in to seal the deals.

The punch-line is that when you miss on such deals on the notion that you could not deliver the goods, and you are dealing with corporate clients, it becomes very difficult to convince them otherwise, especially if they get good services from their current partners.

This is the reason I feel even as HP looks to get things going in the corporate technology services arena, it will find it very hard to get things moving as first as it would have had it moved in earlier.

Conclusion

It is not too late for HP to turn things around. There is still time to get its new-found lease on life up and running and supplement the decline in the PC business. However, based on the strength of players already in this market and HP's recent history, the PC maker might find it a little hard to get results than it would have, had it moved in a few years earlier.

For this reason, I feel that 2014 stabilization of sales and earnings might be too soon, while the sustainable growth projected for 2015, may arrive a year or so, later. That said, there is a good chance that 2014/2015 could be a bottoming period for the stock. Source: There Is Still Time For Hewlett-Packard's New Found Lease On Life

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)