Go Against The Grain On Hewlett-Packard

| About: HP Inc. (HPQ)

Hewlett-Packard's (NYSE:HPQ) management was already planning to prance around over the next two years, firing 27,000 employees. They announced that they were accelerating the plans yesterday-firing 2,000 extra--and the stock market, always a perverse mechanism that adores the cost cuts that come harnessed to firings, cheered, pushing the stock up nearly 1% on an otherwise dreary day.

That was an overreaction, which is why we are suggesting giving back yesterday's unearned move and selling the stock. As loyal readers know, we have not been enamored of HP's recent ability to hold its own on hopes as tenuous as seasonal strength.

Confidence-in everything from the shift in season to Meg Whitman's ability to sprinkle magic dust to the transformative nature of those job cuts--is as widely-held as it is misguided. Wrote The International Business Times recently: "Hewlett-Packard Co., the world's biggest computer company, has nowhere to go but up."

Those are famous last words, if there ever were any. The problem is, of course, that HP has had a revolving door of turnaround strategies. With nearly 30,000 firings, they will be all in on this one. If this strategy crumbles and is abandoned like the others before it, they will be left without a future or a footing. Moreover, there will be a skeleton work force to fall back on. They are now committed to firing nearly 10% of their workforce, some from central areas of the company. Worse, the reeling Palo Alto outfit was forced to raise its anticipated restructuring costs to $3.7 billion through the end of fiscal 2014. That's up from its prior estimate of $3.5 billion and a certain signal that there will be more dour, messy reports like HP's last quarter, which showed a historic loss amid no meaningful signs of a sustained turnaround underway.

HP, meanwhile, is busy trying to buy time. They now say a turn around may take 3-5 years, but HP might not have that much time. They do have somewhere to go but up (all companies with a mainstay product-in this case, PC's-that is dying on the vine) do.

They can keep going down. And they might very well.

Apple's (NASDAQ:AAPL) launch of the new iPhone on Wednesday is yet another reminder that the future in computing is small and mobile and HP, at least at this point, is stuck in the door of the past.

Like Dell (NASDAQ:DELL), HP, for all intents and purposes, appears to be going nowhere quickly. Both are trying to remake themselves in another's image, attempting a magical transformation into IBM (NYSE:IBM). But transforming when the underlying of your reality of your business has already changed for the far worse is nearly impossible. Transformations are easier when they are a bit anticipatory--see: IBM--or a matter of tweaks-hello Starbucks (NASDAQ:SBUX).

You want to buy a company undergoing a turnaround? Wait until you see even a faint sign that it's taking hold. You want to buy a company that is firing like there is no tomorrow? Make certain you know where the company is going to be tomorrow. In HP's case, we don't know, which is why today, we are, all told, going against the grain of recent stock movement as suggesting selling HP.

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.

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