Hewlett-Packard’s investor confidence has been seriously shaken by the company’s recent business moves, and now customers are starting to get nervous, too.

That includes Ray Barnard, the CIO for Fluor Corp., an engineering and construction firm that annually spends upwards of $25 million on new software and hardware. Fluor had recently considered purchasing high-end computers capable of displaying 3D graphics from HP, along with undertaking a pilot project which involved tablets with the tech company.

Now, after the TouchPad fiasco, Barnard said, “I’ve put that all on hold and won’t buy from HP. It appears that they’re lost right now.”

Mr. Barnard’s decision echoes many similar ones coming from other corporate CIOs, many of whom are having a tough time making sense of HP’s announcement last month that its personal computer business would be spun off, it would be killing off its TouchPad tablet PC and smartphones, and would be paying $10.2 billion for Autonomy Corp., a U.K. software maker. At the time of the announcements, HP’s share price plummeted 20 percent, though it has since recovered somewhat along with the market as  a whole.

Several HP customers said their biggest concern was that they see a lack of clear direction from HP, the world’s largest tech company in terms of revenue, with the biggest factor being HP’s decision to end its PC business. Currently HP is the world’s biggest producer, by shipments and revenue, of PCs.

“This appears to just come out of the blue without a really good explanation,” said Frank Cervone, vice chancellor for information services at Purdue University Calumet in Hammond, Ind. “It makes you wonder what the strategy really is and where they are going.”

Mr. Cervone purchases servers and PCs from HP, and was in the process of testing tablets from the company. He said though he still intends to buy servers from HP, he will be reassessing his tablet plans. He said he is uncertain on how to proceed with a “thin-client” computer project which would store information on centralized servers, something he would have normally collaborated on with HP.

“We are in constant contact with our customers to explain our strategy and ensure their needs are being met,” an HP spokeswoman said. “We remain committed to all of our customers and will continue to provide the highest level of service and support as well as regular communication regarding our strategic direction.”

HP competitors are hurrying to take advantage of a growing customer uncertainty. Dell has touted its commitment to PCs on its website, along with tablets and smartphones too, and has started offering a special “HP migration” program, among its efforts. Wyse Technology Inc., a closely held manufacturer of thin-client computers, said that following HP’s announcement, it had its best sales day ever.

Meanwhile, HP has gone into damage control mode. Leo Apotheker, HP’s CEO, who earlier in the year called the PC business as “an immense competitive advantage,” traveled recently to New York, Boston, and London to meet with HP shareholders in an effort to build up support for a PC spinoff and the Autonomy purchase. HP’s CFO, Cathie Lesjak, and HP Chairman Ray Lane have spoken with investors also.

The conversations haven’t had much of an effect on Devin Armstrong, a portfolio manager at Invesco Ltd., which held more that 21 million HP shares as of June 30. Mr. Armstrong has had several conversations with HP executives such as Mr. Lane over the past two weeks but remains skeptical about the price HP is paying for Autonomy.

“We’d like to see them execute the strategy in a more disciplined manner,” Mr. Armstrong said, adding that “customers and investors would benefit from a more clear announcement about what the strategy is going forward.”

In an acknowledgment it hadn’t explained its moves well, HP put its communications chief on special assignment last week and transferred oversight of its public-relations group to another executive. The company is rolling out an advertising campaign to promote the benefits of a standalone PC business. This week, HP temporarily revived production of its TouchPad.

CIOs are adopting a wait-and-see approach. Darren Dworkin, CIO at Cedars Sinai Health System in Los Angeles, said he understands the business logic behind HP’s decision to exit the PC business and focus more on software—but remains disappointed in the move. “It would be hard for me to think that innovation in the PC is over,” Mr. Dworkin said, comparing HP’s move to General Electric Co. getting out of light bulbs.

Cedars Sinai buys a variety of tech products from HP. Mr. Dworkin said he hasn’t stopped buying from HP because of the strategic moves but the company’s decisions are “on our awareness screen. If they keep it up, it will head in a bad direction.”

Other companies said they would remain loyal to HP. “We trust them,” said Ed Leonard, chief technology officer at DreamWorks Animation SKG, who was referred by HP. Mr. Leonard and his team have had several conversations with HP executives over the last two weeks and said he is convinced the tech giant is heading in the right direction. “The worst thing you can have is companies that are afraid to make calls,” he said. Still, he said he needs to reevaluate a plan to deploy the TouchPad tablet to employees.

(Via: WSJ)