"Revenue declines are accelerating, with weakness across all segments except software," writes analyst Dave Novosel. "Free cash flow is dropping because of the massive restructuring charges, while debt reduction is being offset by the weaker EBITDA. Management has admitted that the turnaround may take several years."
Novosel adds that not only is revenue declining, but the drop is accelerating.
"Revenue is falling in every segment except software," he notes. "And things are likely to get worse before they get better. Part of the problem is cyclical, as with the decline in PC sales. Part of is executional, as with the services segment. Free cash flow will suffer from massive restructuring charges. However, it should be robust enough to reduce debt. Yet EBITDA is also falling with the revenue declines and margin pressure. Since management has characterized fiscal 2013 as a fix and rebuild year and 2014 as a year of recovery, we do not expect a turnaround anytime soon. In the meantime, investors may have to contend with substantial headline risk."
HPQ this morning is up 8 cents, at $13.07.
