Hewlett-Packard Faces Long Odds

 | Oct 03, 2012 | 10:46 AM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:
















I don't care what Meg Whitman has to say about Hewlett-Packard (HPQ). The only thing that would move the needle for this dog would be to say that it will merge with Dell (DELL) to take out the capacity overage.

That would at least start to rationalize an industry that has way too much competition, and it would also allow the combined company to focus on more value-added businesses, such as consulting and enterprise tech needs.

Of course, though, Hewlett-Packard won't merge with Dell. The personalities are too different. This isn't like when a leaderless Compaq merged with Hewlett-Packard 11 years ago. Michael Dell is not going to surrender his baby to Hewlett-Packard, and the keepers of the H-P tradition would never agree to such a give-up.

Some would say that you would be just putting two drunken sailors together. Far better would be to do what IBM (IBM) did with its personal computer division: Get rid of it. That was the beginning of the great ascendance of IBM, as it recognized that when you assemble Intel (INTC) chips with Microsoft (MSFT) software, you aren't doing anything value-added.

Hewlett-Packard and Dell remind me of Data General and Digital Equipment, two value traps that people kept betting on right into the ground. Data General shareholders got saved by EMC (EMC), but there was no saving of Digital Equipment investors.

I think of Hewlett-Packard as Apple (AAPL) carrion. Apple took aim at the open system that Microsoft propagated, opting for a closed system that could be controlled by one man, Steve Jobs. One look at the market capitalizations now, though, shows the wisdom of Jobs' position, as Apple is now worth about two and a half times what Microsoft is worth.

More important, though, the customers of Microsoft ended up in a business that reminds me of uncoated free-sheet paper, the archetypal commodity where there can virtually be no valued added. Yes, the customers are the true losers of the Gates experiment.

Of course, Hewlett-Packard isn't just personal computers. It's also printers and consulting. While I use its printers, I, like so many others, hate them, because each machine seems to have a different cartridge type. As far as consulting goes? Take a look at how well SAP (SAP), IBM and Accenture (ACN) are doing. Hewlett-Packard is a distinct also-ran compared with those players, and I believe it is being left behind, not catching up.

Of course, Hewlett-Packard is a huge company that has quite a hold on the big corporation budgets. But without a credible tablet and without a cell-phone, Hewlett-Packard will eventually be ripped out of the enterprise. Products that younger people hate cannot win forever.

So, good luck to the new team. But you've been given one terrible hand, and I just don't see a way to improve it in time to win for shareholders.

Columnist Conversations

Now that AAPL has violated the shorter term support, these are the two areas I have to consider for new buy en...
The symmetry is holding up in MCD.  Target 1 is 163.34 if we continue to hold above here!  ...
As far as TSLA is concerned, I still have a higher target above the market at the 409 area.  I stated in ...
The TLT setup discussed in my last commentary is a bust. Key support was violated and it violated the recent l...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.