It's probably lucky for Hewlett-Packard (NYSE:HPQ) that Apple (Nasdaq:AAPL) and Facebook (Nasdaq:FB) capture so much market attention these days, as this tech company's decline from the spring of 2010 has been nothing short of brutal. Now with a sobering analyst day in the rear-view mirror and guidance for a multi-year turnaround in place, do investors still have reason to hang on in hopes of a turnaround at HP?

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Forget the Quick Fix
If there was anything about the company management's discussion of its turnaround strategy that really stood out, it was the fact that it was quite likely to be a four- or five-year process. That's virtually a lifetime in Wall Street terms, and neither the analyst nor institutional investor community was pleased to hear it (even if it is more realistic). I can see at least one major problem with a four- or five-year tech turnaround. Tech moves quickly, and major trends such as Big Data, cloud/software as a service, virtualization and security appliances were barely on the radar screen of many IT managers five years ago. So if HP management is focused on a multi-year fix-job, can they simultaneously position the company to be competitive in whatever ends up being the hot areas of IT in 2017?

Services in Dire Need of Help
HP's Enterprise Services business looks like it's in real trouble. The company is seeing some runoff with a few major clients, and that's exacerbating what is already a difficult macro environment and a business with long-standing execution issues. The company is going to have to work its way through some bad contracts (price concessions) and new leadership will need time to fix this business, so it's likely going to be some time before this business can even think about really offering serious competition to the likes of IBM (NYSE:IBM) or Accenture (NYSE:ACN).

Hardware - The Difference Between Saying and Doing the Right Things
Ostensibly, HP has some good ideas about what it needs to do with its hardware businesses. Management talked about markets/trends like converged infrastructure, cloud, and software-defined networking, as well the significance of mobile devices, but I have my doubts about HP's ability to translate this into action. The PC market has gotten extremely difficult, with the launch of ultra-books so far proving to be a significant disappointment. At the same time, HP (as well as Dell (Nasdaq:DELL)) are seeing share growth go to non-U.S. manufacturers, particularly Lenovo (OTC:LNVGY). On a related note, while HP could be a share gainer in printing, gaining share in flat (or perhaps declining) market is not going to excite most investors.

While PCs and printers can at least offer solid cash flow production (if not much growth), I'm less confident about the company's networking and storage offerings. The company paid a lot for 3Par and its higher-end offerings, but the company doesn't seem to be gaining on EMC (NYSE:EMC). Likewise, when it comes to servers and networking, I'm not sure HP has the commitment to product development that it will take to really compete with the likes of Cisco (Nasdaq:CSCO) on the higher end, nor the margin structure to fend off emerging rivals like Lenovo or Huawei.

The Right Team for the Job?
One of the most difficult tasks for HP management may simply be in establishing confidence that they're the right team for the job. More than a few analysts have recently come out criticizing CEO Meg Whitman's time at eBay (Nasdaq:EBAY), arguing that she was more of a manager of other people's ideas as opposed to an innovator and leader.

Given that eBay had 30 employees and about $4 million in revenue when she joined (which grew to 15,000 and $8 billion, respectively; and included the acquisition of PayPal), I'd say that criticism seems harsh at best and perhaps even completely unfair. That said, leading a huge tech company (and one that has long under-invested in R&D) through a turnaround at a time when many of its core businesses are under real pressure from changing end markets is a far different challenge than what she faced at eBay.

The Bottom Line
HP looks cheap in some respects. Even if the company cannot recover 2011 levels of revenue and free cash flow production until 2019 (and produce compound average free cash flow growth of about 1% over the next decade), fair value would seem to be well in the $20s. On the other hand, there are real risks that HP continues to struggle through a seemingly endless restructuring/turnaround process.

The PC business appears to have changed in deep fundamental ways, and I'm not confident about the company's position in other IT hardware categories. Likewise, the recent challenges in services and software don't exactly establish the groundwork for much confidence in these businesses either. At a minimum, investors looking at HP as an undervalued turnaround need to have patience. Wall Street seldom has much use for no/low-growth tech stories, and it looks like it'll be a while before there's much hope of growth here.

At the time of writing, Stephen D Simpson owned shares of EMC (since September 2012).

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