Don't Bet On HP Doubling

| About: HP Inc. (HPQ)
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Tim Travis says HP (NYSE:HPQ) could double in 3-5 years.

It could. I could also be elected the next Senator from Georgia. (I'm a Democrat, by the way.)

Travis is betting on CEO Meg Whitman and free cash flows. He calls the previous reign of Leo Apotheker "infamous," and thinks the big writedowns are over.

History says otherwise. Very, very few companies have ever come back from where HP sits. Its PC and printer business represents obsolete technology. It gutted its EDS services unit before suddenly deciding that services were where it's at - as IBM recognized in the 1990s and Dell (DELL) more recently.

There is nothing in Whitman's own track record as an executive to think she can engineer a turnaround of the size required here. The improvements being made in HP's server line only retain its competitiveness, and powerful servers are on the way out because of the cloud anyway. The industry is moving toward virtualized everything - networking, data storage, and computing - and HP is on the wrong side of all of these trends.

What might it do differently? It might offer a "cloud in a box," something Google has done on its own account for years, only based on open source standards like OpenStack that avoids the kind of lock-in customers now experience with Amazon Web Services (AWS). It might be more transparent in advertising its service offerings, and pricing them, something its rivals have never thought of. It might buy a 3D printing company, even a small one like MakerBot, to improve its retail positioning, and offer 3D printing as a service.

There are lots of things it could do. Mostly it needs to set a vision, to tell investors how it's going to make itself worth twice as much in 3-5 years as it's worth today. Because, right now, it's incredibly low valuation, relative to sales, means it's very, very vulnerable to a takeover.

Whitman doesn't have 3-5 years to turn this thing around. This isn't a company making refrigerators or cars. The product line of every tech company three years from now will be radically different from what is being sold today.

Right now HPQ is being valued for its parts, for barely the cost of breaking it up and selling it for scrap. That's going to be increasingly tempting until Whitman can convince the street that she knows what to do, until she can give people like Travis that doubling of valuation they're looking for.

She doesn't have years. She has, maybe months, to do something that's never been done before in the history of technology.

Now you can bet that she'll do it, or you can bet someone comes along to take the company out. But there is very little history of a company buying a tech outfit like HP and doing anything better than breaking it into pieces and selling the pieces. We know that, from HP's own purchase of Compaq a decade ago - they're the Q in the stock symbol.

If Whitman could lay out a compelling vision of why I'll want to be buying stuff from HP in 2015, then I might bet on the jockey. But the horse at this point is only good for French TV dinners.

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.