I told investors to stay away from Hewlett-Packard Company (NYSE/HPQ) in early October, when the shares sunk to the $15.00 level. I saw mass confusion on the part of the company and the direction the company wanted to move under maverick CEO Margaret Whitman. I was also concerned with the declining demand for personal computers (PCs) and laptops, as tablets gained.
Now there are accusations that the company’s acquisition of British software company Autonomy for $11.5 billion in 2011 appears to be characterized by fraud, allegedly staged by the executives at Autonomy. Hewlett-Packard (HP) assumed an $8.8-billion charge relating to its purchase of Autonomy and is accusing the company of misrepresenting its financial position. According to HP, “serious accounting improprieties” were found. (“Autonomy Made ‘Willful Effort to Mislead’ HP: CEO Whitman,” Yahoo! Finance via CNBC, November 20, 2012.)
For this former top technology company, my stock analysis is that the news of the allegations is not what you want to hear at a time when the company is fighting for its survival.
The stock is down 60% from its 52-week high and is on fragile ground.
CEO Whitman has a titanic job ahead of her, as she tries to turn the sinking ship around; but with crippling declines in the demand for PCs and intense competition in printers and other businesses, my stock analysis is that the path for HP will be difficult.
My technical analysis of HP’s chart tells the story of the company’s demise from a Wall Street darling to a misfit. My stock analysis is that the game of musical chairs at the helm of HP has hurt the company’s business, given that there have been three CEOs since 2010. HP had been in the retail tablet market but exited in August 2011 under the leadership of then CEO Leo Apotheker, who took over in 2010 from Mark Hurd. Following the company’s exit from the tablet business, Apotheker was replaced by Whitman in September 2011, who now faces the daunting task of figuring out what to do, according to my stock analysis.
Chart courtesy of www.StockCharts.com
It will take years to turn HP around, according to Whitman, as the company looks to streamline its product line and produce a leaner, more efficient technology company. Yet my stock analysis tells me that the company’s lack of exposure in the surging mobile business is problematic; but this could change, as HP now has a dedicated group responsible for growing the mobile business, though it may be too late, according to my stock analysis.
The PC market is dead and HP will need to re-invent itself under Whitman’s five-year plan that predicts growth will return by 2015, but my stock analysis tells me that it will not be easy. PC growth is estimated to be below one percent this year, according to International Data Corporation (IDC).
My stock analysis is that you can blame Apple Inc. (NASDAQ/AAPL) for the PC makers’ hardships, namely with the explosive growth in the tablet as a replacement for the laptop.
When it comes to HP, it’s sad to see this former Wall Street star fade.
Why a Recent Acquisition Could Be the Last Straw for HP was last modified: November 21st, 2012 by George Leong, B.Comm.
George Leong is a senior editor at Lombardi Financial. He has been involved in analyzing the stock markets for two decades, employing both fundamental and technical analysis. His overall market timing and trading knowledge are extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi Financial’s popular financial newsletters, including Red-Hot Small-Caps, Lombardi’s Special Situations, Judgment Day Profit Letter, Pennies to Millions, and 100% Letter. He is also the editor-in-chief of a... Read Full Bio »
Forecasts Aug. 31, 2015
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 31, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)