I have come across a sea of analyses discussing the turnaround story of Hewlett-Packard (HPQ) since the time this behemoth came under the control of CEO Meg Whitman. Meg took over the rein of a struggling HP after the Autonomy deal debacle and resolved to turnaround HP in a period of approximately 5 years. It has almost been more than 2 years and positive numbers around y-o-y growth, dividend etc. and strengthening presence of the company in core business areas already indicate a strong comeback.
Strong results
In the first quarter, HP's performance exceeded the expectations of analysts and investors. The company declared a diluted EPS of $0.90 per share on a non-GAAP basis as against the outlook of $0.82 to $0.86 per share. Though the revenue was marginally down, it delivered a sizeable cash flow of $3 billion from operations. One of HP's core segments, industry standard servers saw a revenue growth of 6% y-o-y. Overall, the company delivered reasonable results being in a turnaround phase, which shows that it is progressing in the correct direction.
The door to massive opportunities
In a recent announcement, HP confirmed its plans to enter the hitherto reserved 3D printing industry, a move that would be a big threat to the already existing players in the industry i.e. Stratasys (SSYS) and 3D Systems (DDD). While, HP has been a revolutionary brand in the 2D printing segment, developing and selling 3D printers would be a different ball game. In fact, a solid performance in the printing segment over the last year has sustained HP's image and kept the confidence of investors afloat. For Q1, the operating margin in this segment was approximately 16.8%, making it one of the high performers.
CEO Meg Whitman mentioned the company's intention to make a "big technology announcement" regarding 3D printing around June and this has stirred interest among Street analysts.
Earlier, HP had entered into a manufacturing and distribution agreement with Stratasys whereby HP sold 3D printers under its label, developed by Stratasys. Though that partnership ended in 2012, yet it is a testament of HP's robust distribution network. Hence, HP's focus should be on developing an innovative, affordable and effective range of printers.
The progress of Autonomy
A double-digit growth in Autonomy's IDOL (a meaning based platform that enables extraction of meaning from information) licence revenue and a major win with China Mobile has set the ball rolling after the over-valued deal had marred HP's reputation. The deal with China mobile will allow citizens to access public service information on the go. HP's innovation streak has helped it to launch IDOL 10 and Data Protector 8.1, first ever self-aware backup and recovery solution.
In a move to expand this platform to developers, HP is planning to break down IDOL into individual web services. This move could usher in a good number of developers who could not be a part of HP's audience because IDOL was being sold as an enterprise package.
Battling the slowdown in PC demand
Apart from the above-mentioned business areas, HP's core competency still lies in PC markets and we are already aware of the smart devices wave that has almost swept the demand for desktops. In spite of battered demand in consumer PC market, HP increased the unit shipments by 6% y-o-y due to improved demand conditions in the commercial PC markets. As a result of a sturdy performance, HP's market share is now just slightly lower than that of Lenovo (LNVGY), the leader in the PC market. A report from Gartner showcases the shares of enterprises that occupy this market.
As I mentioned earlier, PC demand is on a gradual decline and the numbers on the Gartner report also narrate a similar story. Identifying the trend, HP has taken the initiative to expand its presence in the smart devices market. It recently introduced two new devices in the Indian market, the HP Slate 6 and Slate 7 VoiceTab. However, it is clear that a good amount of work needs to be done by HP on smart devices in order to establish its presence in an already crowded space.
Future Outlook
One of HP's main strengths is private cloud solutions and it was recognized as a leader in the space by Forrester Research. In Q1, the Cloud saw a double-digit growth and as such, it is going to be HP's primary strategic area in the future. CEO Meg Whitman seemed highly confident about HP's offerings in the cloud space especially the hybrid cloud management platform. Going ahead, HP will focus on inorganic growth in building its cloud platform besides Security and Big Data firms.
In nutshell, HP is eyeing acquisitions in key areas like Cloud, security and data management in order to achieve growth. Though the company management has not laid out specific plans related to these acquisitions but analysts are hopeful that HP can get massive growth from these avenues.
Big Threats
Besides the headwinds in the PC market, HP would face a big threat from Lenovo once the latter completes the acquisition of IBM's server business. If this deal goes through then Lenovo's share of the server markets would jump to 14% from 2%. This will endanger HP's server business, wherein the company is progressing smoothly.
Additionally, investors should also watch out for Cisco's (CSCO) plans with cloud after the company unveiled its public cloud services. Cisco has planned to spend approximately $1 billion over the next couple of years to enter the cloud computing market. This article does well in comparing the potential of Cisco and HP in this space and highlights the reasons for HP's superiority over Cisco.
Final words
While fundamentally the company appears to be in a sweet spot, the technical strength of the company is also improving. A well-planned restructuring exercise has been behind strong operating margins as the company saved approximately $2 billion in staffing costs in 2013. Besides the restructuring plan, HP has also worked on upgrading its supply chain that has resulted in disciplined cost management.
The management of HP is committed to return 50% of its cash flow to the shareholders in 2014 via dividends and share repurchases. This suggests the positive perception of the board towards future operations and confidence in company's initiatives.
An addition to points in favor of HP is the fact that in spite of trading at multi-year highs, the stock is available at a cheap valuation. Based on the earnings outlook given by the management for FY 2014 i.e. $3.50 to $3.75 per share, the share is trading at a P/E of around 10. The same multiple is given by a calculation based on free cash flow per share. This suggests that it is still a good time to make a position in the stock and participate in the future rally.
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Stan Honda, AFP/Getty Images DETROIT -- The cost of recalling nearly 7 million cars and trucks sank General Motors' first-quarter profit, but the company's CEO said the much-publicized recalls have yet to cut into sales. GM (GM) on Thursday reported its worst financial results in more than four years, with profit falling 86 percent to $125 million. The biggest contributor was a $1.3 billion charge to cover a series of recalls announced since early February, most notably 2.6 million small cars with defective ignition switches. The Detroit automaker is facing government investigations and civil lawsuits over the small-car recall. On a conference call, CEO Mary Barra called the company's handling of the recall unacceptable but said that, so far, bad publicity has not had a "meaningful impact" on sales. She also said GM is offering employee discounts to owners of cars with the faulty ignition switches. After opening with a 2 percent gain, GM shares were down 13 cents to $34.26 around midday. GM made 6 cents a share in the first quarter, down from 58 cents a year ago. The recall charge alone cut 48 cents off first-quarter earnings. But excluding one-time items, GM made 29 cents a share, far above Wall Street estimates of 3 cents a share. Revenue rose more than 1 percent. Still, it was a rough start to what many expected would be a strong year for the Detroit automaker. The U.S. government its remaining stake in GM at the end of last year, freeing the company of the "Government Motors" nickname. In January, GM announced its first quarterly dividend in six years. And it has rolled out multiple new models in recent months including high-profit pickup trucks and full-size SUVs. But the recalls have overshadowed Barra's first months as CEO. GM has linked the ignition switch problem to 13 deaths and has acknowledged knowing about it for at least a decade. Barra was grilled earlier this month by two congressional panels pushing for an explanation on why GM dragged its feet. She said the answers would come from an ongoing internal investigation. GM also announced other recalls that pushed the total to near 7 million cars and trucks. Barra said the company has formed a leadership team to focus on recall issues. But, as before, she made no excuses for GM's behavior in the ignition switch controversy. "It doesn't matter that the roots of the issue are more than a decade old," she said. She told analysts that dealers are taking advantage of increased showroom traffic due to the recalls. But spokesman Jim Cain said GM has asked dealers to use employee pricing not as a marketing tool, but to help the small-car owners trade for a new car. Employees generally pay about 4 percent below dealer invoice. Without the recalls, GM would have had a strong quarter. The company's revenue grew 1.3 percent from a year ago to $37.4 billion, in line with analysts' estimates. "Clearly the headline results are overshadowed by the recall charges," Chief Financial Officer Chuck Stevens said. GM's global sales for the quarter rose 2.3 percent to 2.42 million cars and trucks. China sales grew 13 percent, and sales in Europe rose less than 1 percent. But sales fell 2 percent in North America, GM's most profitable region, and they dropped 10 percent in South America. The company's North America division earned $600 million. Without the recall charge, it would have earned $1.9 billion, up from $1.4 billion a year ago. Sales in the region fell to 745,000 cars and trucks. Stevens said GM is getting $2,000 more for its vehicles on average in the U.S. than it did a year ago, and $5,000 more for pickup trucks. Stevens said the $1.3 billion charge covers the entire cost of parts for the recalls, as well as installation by dealers and loaner vehicles for owners of cars with bad ignition switches. So far GM has paid for 36,000 loaners. He said it's too early to tell if GM will take more recall-related charges. GM faces multiple lawsuits from families of people killed in crashes, plus owners who claim the recall has lowered the value of their vehicles. GM has hired Kenneth Feinberg -- who handled funds for victims of the Sept. 11, 2001 terrorist attacks and the BP oil spill in the Gulf of Mexico -- to explore ways to compensate crash victims. Stevens said no decision has been made on establishing a fund. GM said ignition parts supplier Delphi is producing parts on one assembly line, running multiple shifts seven days per week. Second and third lines should be up later in the summer, giving GM the ability to finish the small-car repairs by October. 
In the Brazilian winter of 2013, millions took to the streets to protest against poor social services. It was one of the biggest middle class protests since the ousting of President Fernando Collor, and prior to that, the pro-democracy movements during the 1970s military dictatorship. The sign reads: "Sorry for the inconvenience while we improve your country." 
Gettystock Later this year, at the age of 32, I plan to quit my full-time job as a software developer and don't intend to look for another one. By then, I expect my portfolio will be large enough to fund my essential expenses for at least the next 30 years, if not indefinitely. I've built my nest egg simply by watching my spending and investing as much of my paycheck as I can. I am currently investing more than 70 percent and no, that's not a typo -- of my after-tax income into my retirement and taxable investment accounts. I'd Rather Travel the World When I graduated from college with a degree in computer science, I was excited to work hard and build a successful programming career in Newbury, Vt., where I live with my wife, Jill. I thought maybe I'd even become wealthy along the way. But then reality kicked in, and my life seemed to become one endless scene from "Office Space" after another. After a few years of pointless meetings and inept managers, my enthusiasm was gone, and the thought of spending the next 30-plus years doing the same thing was depressing to me. I felt trapped because I had worked hard to get my degree and establish my career. I didn't feel as if I could just quit and start something new. I also didn't want to trade my high five-figure salary for a lower one, so I continued, albeit unhappily, on the same career trajectory. Rather than use my salary to buy frivolous material things, however, I used my money to fund sabbaticals for several months at a time that enabled Jill and I to see the world. Jill is from Scotland, so every five years or so we would quit our jobs -- she works as an optometrist -- and spend several months in Europe and other countries. Because the market is strong for software developers, I never worried about finding another job, and often whichever company I worked with last would ask me to consult for them until I found my next gig. One three-month stretch in China, Tibet and Nepal made me realize just how rich most Americans already are, myself included.This further drove home the realization that I didn't need to accumulate the things my peers had, like big houses and fancy cars. Fast-Tracking Financial Independence Taking these sabbaticals was what I saw value in -- but it wasn't until around 2011, when I stumbled across a website called Early Retirement Extreme, that I realized I could work hard for five to ten years to make those periodic trips more of a permanent fixture. I was already a pretty good saver, but what I read on the site encouraged me to ramp it up even more. All I would need to do to retire early was to save and invest until my portfolio reached at least 25 times my annual expenses. 
Credit: Brandon Sutherland via LearnVest Based on historical data, my thinking was that those investments should return an inflation-adjusted average of 5 percent every year. I calculated that I would only need to withdraw, at most, 4 percent every year to cover my estimated essential expenses -- more on those in a minute -- which means my portfolio should have a high likelihood of never running out of money. The best strategy for me, both from a savings and tax perspective, was to max out tax-advantaged retirement accounts, including a 401(a), a 403(b) -- both are types of defined-contribution plans offered by my employer -- and a Health Savings Account. I max out all of these accounts each year, and get a 5 percent match on my 401(a). I also max out my Roth IRA, and anything that's left over, after expenses, goes into my taxable investment account. As far as my portfolio strategy goes, I prefer passive investing -- putting my money into investments like mutual funds or exchange-traded funds that track an index, rather than actively trading in an effort to time the market. Studies have shown that, over the long term, passive investing beats out active investing. I invest the majority of my money in diversified index funds. My current allocation consists of 75 percent U.S. stocks, 10 percent international stocks, 10 percent real estate investment trust, and 5 percent cash. I'll likely transition into bonds as I get older but I'm happy to take on more risk now. Since I'll most likely need to access my retirement money prior to standard retirement age, I also plan to build a Roth IRA conversion ladder. IRS rules allow you to roll over 401(k)s, traditional IRAs and 403(b) accounts into a Roth IRA and withdraw those conversions five years later, penalty-free. To build a consistent income stream after I leave my job, I plan to roll over amounts from my retirement accounts equal to my annual expenses every year, starting next year. Five years from the time I make my first rollover, I'll be able to take out that amount annually without paying any early-withdrawal penalties. Living Simply Is Half the Battle I give most of the credit for my ability to walk away from full-time employment to the low expenses my wife and I are able to maintain. We don't have car payments because we bought our used cars with cash. We live in a modest house with a very reasonable $600 per month mortgage payment. We have a Netflix subscription instead of an expensive cable package, and while we eat out occasionally, we prefer to cook our meals at home. All told, we're able to live comfortably on $2,200 a month. We intend to shave our costs even further after I leave my job by spending parts of the year living in low-cost countries like Thailand and Guatemala. We enjoy traveling and experiencing new cultures, so we'd get to see the world and live on less at the same time. And luckily, I've become quite good at hacking travel by using miles, rewards points and premium status. Jill plans to continue working as a locum optometrist (an optometrist who fills in at other people's practices) when we are in the States or in Scotland, but she will take off for a few months every year so we can live in other countries. Because we largely keep our finances separate, she still plans to cover her half of our expenses with her income, while my savings will cover my half. I don't plan to spend the rest of my "retirement" sitting on a beach. I do want to make a meaningful contribution to the world, so I will continue working part time on my own projects, including web applications, mobile applications and writing projects -- including the blog I started about my journey to financial independence, madfientist.com -- and will use the money I earn to fund my discretionary spending. I also plan to write music, learn languages, spend quality time with loved ones and develop new skills through volunteer work. The possibilities are endless, and having the time to explore those -- rather than stay chained to a career that no longer excites me -- is worth saving for. Tips for Aspiring Early Retirees If you're interested in leaving the daily grind early, I'd start with really picturing your life after leaving work. The more you can visualize what your perfect life will be like, the easier it will be to make "sacrifices" along the way. I put "sacrifices" in quotes because most of the lifestyle changes you make to achieve this goal will probably make you happier anyway. That's been the case for me. I'd also suggest closely scrutinizing your expenses. You might be paying for things that don't make your life better, so you should cut those out immediately. For each expense, ask yourself: "If giving this up meant I could quit my job tomorrow, would I?" If you answer yes, that expense isn't as important to you as your financial freedom, so eliminate it from your life, or find a free or cheaper alternative.