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HP Stock Slumps On Continued Weak PC, Printer Sales Outlook

HP Inc. ( HPQ ) stock tumbled on Thursday, a day after the PC and printer maker reported in-line sales and earnings for its fiscal first quarter but signaled more challenges ahead. Shares were down more than 4%, near 10.30, in midday trading on the stock market today . At least four Wall Street analysts cut their price targets on HP stock after the company posted results. In response to continued sluggish PC and printer sales, HP management decided to accelerate its corporate restructuring actions. The Palo Alto, Calif.-based company expects to cut 3,000 jobs this year instead of over a three-year period as originally planned. “We believe that management is taking the necessary steps to right-size its expenses and develop new products to drive profitable share gains,” Deutsche Bank analyst Sherri Scribner said in a research report. She maintained her buy rating on HP stock but cut her price target to 13 from 16. BMO Capital Markets analyst Thanos Moschopoulos reiterated his market perform rating on HP stock but cut his price target to 12 from 13. “We believe the tough road ahead will persist as PC and printer markets continue to shrink,” he said in a report. For its fiscal Q1 ended Jan. 31 , HP earned 36 cents a share excluding items on sales of $12.2 billion, in line with forecasts. On a year-over-year basis, EPS and sales each dropped 12%. On a constant currency basis, factoring out foreign-exchange impact, sales slid 5%. For the current quarter, HP expects non-GAAP earnings per share of 35 to 40 cents. Analysts polled by Thomson Reuters had been modeling 39 cents, on sales of $11.9 billion. HP did not give a Q2 sales forecast. HP also reiterated its fiscal 2016 EPS guidance of $1.59 to $1.69 on a non-GAAP basis. Analysts had been targeting $1.60. Sterne Agee CRT analyst Rob Cihra said HP could have a tough time making its full-year EPS target unless it buys back more stock than planned. He rates HP as neutral, with a price target of 11. New HP Printers Unlikely To ‘Move Needle’ The PC market is a cyclical business at best and is in secular decline at worst, Cihra said. Meanwhile, the company’s cash-cow printing business is facing declining sales in both hardware and ink supplies. New printing ventures like commercial A3 copiers/printers and 3D printers are unlikely “to move the needle anytime soon,” Cihra said. PCs accounted for 62% of HP’s revenue in Q1, and printing brought in the remaining 38%. Printing accounted for 77% of operating profit, with PCs contributing 23% of the total. Personal computer revenue fell 13% year over year in Q1, while printing revenue dropped 17%. On a constant currency basis, PC revenue fell 6%, and printer revenue tumbled 11%. Printing supplies revenue dropped 14%, or down 8% in constant currency. “Fundamentals in the PC and printing industries continue to erode,” Pacific Crest Securities analyst Brent Bracelin said in a report. “The pace of erosion in the printing segment, which represents 77% of profits, (is) problematic relative to expectations for profits to rebound in the second half. Until printing stabilizes, HPQ shares could remain at depressed levels.” “We operate in mature markets,” HP CEO Dion Weisler said on a conference call with analysts. “This is an environment where we know how to win, gain share and out-execute our competitors.”

Salesforce.com Leads Software Stocks’ Harmony Up; Even Tableau Hums

The morning bell became music to the ears of software stock investors Thursday as Wall Street used Salesforce.com’s Q4 strength and outlook to harmonize. Salesforce.com ( CRM ), an enterprise cloud pioneer and the No. 1 maker of customer relationship management software, sang soprano, its stock gapping up 11% as soon as the conductor raised the baton on the morning after its upbeat earnings report late Wednesday. Rival SAP ( SAP ) was up 1.6% in early trade in the stock market today . Fellow enterprise software stocks Ultimate Software ( ULTI ) rose 2%, ServiceNow ( NOW ) 2.8% and Manhattan Associates ( MANH ) nearly 1%. The harmony extended to database choir: Legacy leader Oracle ( ORCL ) rose a fraction, Qlik ( QLIK ) 2.7%, Splunk ( SPLK ) 3.9% and Hortonworks ( HDP ) 1.8%. Workday ( WDAY ) leapt 5% despite a lowered price target from Wedbush. Even Tableau Software ( DATA ) was up as much as 3.5% early Thursday. Tableau stock collapsed 49.5% on Feb. 5 after the company issued soft Q4 results and an outlook of slower growth, sending the entire enterprise software sector into a tailspin. “Slowdown? What Slowdown?” asked FBN analyst Shebly Seyrafi in a Thursday research note, citing “600 seven-figure deals” signed by Salesforce.com during Q4. Salesforce set off a sectorwide rebound, but will it last? By midday, Salesforce had eased to an 8% gain, near 67.50. Most of the other stock also had eased, but remained up. Hortonworks, though, was down more than 1% and Manhattan and Splunk were down a fraction. Canaccord Genuity maintained its buy rating, but without explanation lowered its price target on Salesforce stock to 88 from 95 while praising the company. FBR, too, reportedly lowered its price target, to 82 from 88, but maintained its outperform rating. “We have pushed back against the pessimism that has permeated investors’ imaginations for the past 50 days,” wrote Canaccord analyst Richard Davis in a research note issued Thursday morning. “Salesforce decisively demonstrated that the world is far from ending, and for well-run, well-positioned companies with talented salespeople, growth is still coming in large chunks. “There was literally nothing wrong with this quarter’s print or longer-term outlook. We believe the stock’s 9% after-hours (Wednesday) pop is just the beginning of a year in which the stock delivers price appreciation that is materially better than the overall stock market.” For its fiscal Q4 ended Jan. 31, Salesforce said adjusted EPS rose 36% to 19, matching analyst consensus, on revenue up 25% to $1.81 billion vs. Wall Street’s $1.79 billion model. For fiscal Q1 2017, Salesforce expects adjusted EPS of 23-24 cents, up 47% at the midpoint and ahead of analysts’ 21-cent estimates, on sales up 25% to $1.89 billion, whereas analysts expected $1.86 billion. Brian Wieser, an analyst with Pivotal Research, noted that deferred revenue growth was up 29% in Q4, foreshadowing sales to come. “By segment, Marketing Cloud was up by 31%,” he wrote in a Thursday research note. “App Cloud and other (formerly the Platform segment) was up by 43%, Services Cloud was up by 35% and the flagship Sales Cloud was up by +12%. “Commentary about activity in the most recent quarter included reference to the company’s signing of a new nine-figure transaction as well as a renewal of another large customer, also with a nine-figure sum.” Image provided by Shutterstock .

IBM Cements Security Standing With Redoubled Check Point Alliance

Tech giant IBM ( IBM ) is solidifying its cybersecurity standing by deepening ties to No. 1 pure player Check Point Software Technology ( CHKP ) to pool research and integrate systems, the companies were scheduled to announce Thursday. It’s the most recent in a series of IBM moves to publicly step-up its cybersecurity initiatives. In 2015, IBM drew in $2 billion in cybersecurity sales , just 2.4% of total revenue. But that dollar mark easily topped total sales for Palo Alto Networks ( PANW ), Proofpoint ( PFPT ), Fortinet ( FTNT ) and FireEye ( FEYE ), and 12% year-over-year growth outstripped that of Symantec ( SYMC ) and Check Point. By combining forces, IBM and Check Point aim to thwart what the United Nations estimates is the $445 billion cybercrime underworld. Check Point’s and IBM Security’s researchers will be free to cross company borders to discuss threat data. And several Check Point applications will be folded into IBM technology, Check Point’s vice president of security services, Avi Rembaum, told IBD. The alliance redoubles an 18-year relationship between IBM and Check Point. IBM manages security offerings for clients across the globe, and those implementations sometimes include Check Point products. The two companies have partnered in that regard for the past 18 years. Thus, IBM is keenly apprised of Check Point’s software. Under the new accord, Check Point will further school IBM on its tech. “Tightening the relationship means we’ll be giving IBM very deep guidance around exactly what fields they should be looking for and how systems integrate,” Rembaum said. The new alliance centers on four main keys. Check Point and IBM will combine research forces to create “a gigantic pool of security researchers,” Rembaum said. Doing so will expand the potential threat intelligence-gathering net, but also lend credibility to potential discoveries. “When we conduct research, it’s nice to have another leading organization with which we can provide notes,” he said. “It’s helpful to have a pool of researchers to validate assumptions. . . . When two sources say it’s true, it makes it more relevant and more critical.” But what’s more compelling is the integrated threat-prevention and analytics technologies, Rembaum says. Check Point will fold its SmartConsole application into the IBM Security App Exchange for integration with IBM’s Security QRadar Intelligence Platform. Together, the systems can tackle the entire security gamut — analyzing, blocking and mitigating attacks. The integration also means that a customer can operate within an IBM space but still access Check Point functions, Rembaum said. IBM customers will also be allowed to manage Check Point Mobile Threat Prevention within IBM’s MaaS360 enterprise-mobility management system, a software used to remove malicious apps and do quick security rollouts. Mobile is “the most critical space” for customers to protect, he said. “(Smartphones) are an always-on and always-connected vehicle for employees,” he said. “And they operate outside the corporate security perimeter.” The expanded alliance also allows IBM to manage Check Point’s entire suite of products for clients, Rembaum said. Check Point will expand the number of tools IBM supports. “So IBM can be there in lockstep with us when we offer services,” he said.