HEWLETT-PACKARD CO. (New York symbol HPQ; www.hp.com) is a leading maker of personal computers and printers. It also makes server computers and networking products for businesses.

Demand for computers and printers, which account for half of Hewlett’s sales, continues to suffer as consumers shift to mobile devices. As a result, the company’s sales will likely fall to $111 billion in its 2013 fiscal year, which ends October 31, 2013, from $120.4 billion in 2012. However, Hewlett believes its sales will stabilize in 2014 and rise in 2015.

As well, businesses are holding off on buying new computers due to the uncertain economy and the fact that users will need to learn the redesigned interface that’s part of Microsoft’s new Windows 8 operating system.

Earlier this year, Hewlett-Packard introduced its new Moonshot server computers, which take up much less space than current servers and use up to 90% less power. These new servers are designed to help Hewlett’s business clients handle rising traffic as more people use mobile devices to access websites and corporate databases.

Tech stocks: Merger of computer and printing divisions key to restructuring plan

Meanwhile, the company continues to make progress on a major restructuring plan that includes merging its computer and printing divisions, simplifying its product lines and cutting 8% of its workforce. Hewlett expects to complete these moves in 2014.

The company will invest some of the resulting savings in faster-growing areas, such as cloud computing. The savings will also help it pay down its long-term debt of $17.1 billion, which is a high 38% of its market cap.

Excluding severance costs and other unusual items, Hewlett’s earnings will probably fall 33.3%, from $4.05 a share in fiscal 2012 to around $2.70 this year. The company’s $0.58 dividend yields 2.5%.

In the latest edition of Wall Street Stock Forecaster, we look at how slow computer sales and uncertainty over Hewlett-Packard’s turnaround plan will affect next year’s earnings. We also look at whether it can maintain its dividend. We conclude with our clear buy-hold-sell advice on the stock.

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