Hewlett-Packard Co.'s stock surged to its biggest one-day gain since
2008 after the company's latest quarterly earnings report indicated the
ailing personal computer and printer maker isn't quite as sick as many
investors feared.
The spark
Chalk up Friday's 12 percent gain to a
quintessential relief rally. After the stock market closed Thursday, HP
released quarterly earnings and revenue that topped the projections of
the company's management and analysts.
Although the results showed
that HP's PC business and other key operations are still slumping, the
numbers were a soothing contrast to the company's ghastly performance
during much of last year. In the previous two quarters alone, HP had
registered losses totaling $15.3 billion, reflecting the costs of two
major acquisitions that had gone awry. In the January quarter, it posted
a $1.2 billion profit.
The big picture
Now that HP did better
than expected in its fiscal first quarter, which ended in January, it's
raised hopes that HP CEO Meg Whitman might be able to engineer a
turnaround ahead of schedule. Whitman has consistently described her
plan as a "multi-year journey."
HP, which is based in Palo, Alto,
Calif., fed the optimism by predicting that its earnings for the current
quarter will be slightly better than analysts' projections. Even so,
Whitman cautioned in a Thursday conference call with analysts that HP
still faces plenty of challenges. Among other things, the downturn in PC
sales could still get even worse, according to HP. In the most recent
quarter, revenue in HP's PC division fell 8 percent from the previous
year.
Like most other PC makers, HP is scrambling to adapt to a
technological shift that is driving more spending on smartphones and
tablet computers instead of desktop and laptop machines.
Plenty of
investors still have their doubts about HP's ability to evolve while it
also tries to expand into more profitable technology niches such as
business software, data-analysis tools and consulting services. Even
after Friday's big boost, the shares are about 15 percent below where
they stood when Whitman became CEO in September 2011. Over the past
three years, shares have lost about 60 percent of their value.
Analyst's take
Many analysts seem to think the market may have overreacted to
HP's latest earnings report. One, Sterene Agee's Shaw Wu, said in a
Friday research note that he didn't expect big future stock-market
gains.
Share action
HP's stock climbed $2.10, or 12 percent, to
close at $19.20. That marked the company's biggest one-day gain since a
14.5 percent increase in November 2008 and left the shares at its
highest closing price in six months.