Hewlett-Packard Company (NYSE:HPQ) has not been a favorite of investors for some time now. On top of that, Jim Chanos keeps up the debate on why he is shorting HPQ stock, and how bad the whole PC business is doing. Jefferies, the investment firm, has now downgraded HPQ from Hold to Underperform.

HP logo

The analysts at Jefferies think that we will see HP aggressively attacking the smartphone and tablet market, and these investments will not be without risk. HP’s balance sheet is already stressed, and these new ventures will add to the costs. Jefferies EPS forecast for 2013 is $3.58, which is below the the Street’s consensus estimate of $4.22. The price target on share price has been reduced from $17 to $14. The major headwinds for HP’s future in the PC business, is the gap between slowing demand and surfeit products in China and Europe. Q3 shipments are expected to be much lower than the typical range. The analysis predicts a flat quarter over quarter increase in shipments. Moreover, Jefferies does not expect any stimulus from Windows 8. OEMs, like Hewlett-Packard Company (NYSE:HPQ) and Dell Inc. (NASDAQ:DELL), have not announced any Windows 8 based products for Q4 2012, and it is likely that these companies are willing to wait and develop their strategy after it is established how the new OS is received by consumers. The tablet fever is also spreading worldwide which is a significant problem for the company, additionally Microsoft Corporation (NASDAQ:MSFT) is also focusing on its Surface Tablet, instead of its success in a PC based OS.

Another problem that could ail the embattled Hewlett-Packard Company (NYSE:HPQ), is China’s subsidy provision on energy efficient PCs. The desktop business is already stressed, and this measure will only serve as an added pressure when vendors will not be able to clear out non-energy efficient PCs.

Similar cons for HP’s business are seen in its services sector and printer business. HP could resurface, if Windows 8 is a hit, printer demand improves, and the cost cuts achieved from restructuring are not reinvested in other risky businesses.

Hewlett-Packard Company (NYSE:HPQ)’s step into mobile business was unsuccessful with the acquisition of Palm OS Software, bought in 2010. Palm based tablets were discontinued in the summer of 2011.