Ahead of the Bell: Hewlett-Packard

NEW YORK -- Analysts on Thursday voiced concerns that Hewlett-Packard's ongoing efforts to restructure its operations might not be enough to turn around the struggling computer company any time soon.

HP's CEO Meg Whitman told analysts Wednesday that internal and economic turmoil will cause its earnings to fall by more than 10 percent next year, a decline that hadn't been anticipated by Wall Street.

HP's troubles stem from a combination of managerial malaise, high-priced acquisitions that haven't paid off and an inability to offset the damage done to its personal computer and printer divisions by the rising popularity of smartphones and tablet computers.

In speaking to analysts Wednesday, Whitman maintained that she inherited a bloated, poorly managed company that hasn't been innovating quickly enough in any of its divisions, which span from PCs and printers to software and data storage.

Whitman, who became the company's CEO one year ago, reiterated that the recovery will take several years to complete. It could be 2015 before HP's revenue growth begins to accelerate again, she said. By 2016, Whitman sees HP's revenue increasing at the same pace as the U.S. economy's overall growth, with earnings rising at a faster clip.

Stifel Nicolaus analyst Aaron Rakers backed his "Hold" rating for the company, saying that while he appreciates the company's candid discussion of its problems, he expects many investors to remain skeptical.

"We believe investors will be continually left to question HP's ability to execute in a rapidly changing competitive landscape relative to its five-year goals, as well as the impacts to the company's free cash flow story and balance sheet (capital structure) over the next several quarters," Rakers wrote in a note to investors.

Stern Agee analyst Shawn Wu backed his "Buy" rating, mainly as a result of the steep drop in the company's stock price. Since the beginning of this year, HP shares have tumbled steadily and lost about 42 percent of their value.

"In retrospect, we shouldn't have upgraded shares a few quarters ago with a turnaround looking on track, but find the risk-reward favorable at these depressed levels," Wu wrote in his note.

But Jefferies analyst Peter Misek was less optimistic, backing his "Underperform" rating and cutting his price target for the company's stock by $2 to $12. "In our view, the turnaround strategy is still unclear," he wrote in his note.

HP shares fell 8 cents to $14.83 in premarket trading Thursday. That is 2 cents below its low for the year of $14.85 per share set Wednesday.