Hewlett-Packard is a conglomerate made of five very large businesses. These fall into three categories. First: businesses in industries facing secular stagnation or decline (personal computers and printing). Second: businesses where HP is in a notably weak competitive position (services and software). Third: businesses threatened by commoditisation (enterprise hardware).

Is this depressing taxonomy exaggerated? Mildly, perhaps, but note that in the first nine months of this year, operating profits at four of HP’s five divisions fell by more than 20 per cent. The last, software, was boosted by the $10bn acquisition of Autonomy. At its analysts’ meeting on Wednesday, the company said it expected to earn about $3.50 a share next year compared with about $4 this year. The analysts in attendance had been hoping for $4.17.

Chief executive Meg Whitman said that sales growth would hit the GDP growth rate – by 2016. Is that real or nominal GDP? With a prediction this dreary, the difference matters. Trading at a little over four times the new guidance (after that guidance hammered the shares down 12 per cent) the stock cannot possibly be considered cheap. Businesses under stress decline at unpredictable rates, and never in a straight line. Turnrounds are not predictable, either. So investors need a wide margin of safety in the valuation.

On the bright side, HP has become an exceptionally simple investment proposition. The company can lay out all the strategic plans and restructurings it likes, say the phrase “cloud computing” any number of times, even float the sale of a division or two (again). The shares will remain flat on their backs. What will move the stock is improving momentum in operating profit. For HP, it’s as easy, and as hard, as execution.

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