Cramer: HP Inc.'s Earnings Call Has Ignited All of Tech

 | Feb 26, 2018 | 7:04 AM EST
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Sometimes, good quarters sneak up and say: "Look at us, we just changed the game and you better give us the recognition that we deserve."

HP Inc. (HPQ) and its CEO Dion Weisler announced a quarter last week that did just that. Oh sure, the stock ran; duly noted. It had one of the better performances during an already big day for the averages.

And it wasn't the first good quarter that this company has had. Your stock doesn't go from $16 to $22 in one year's time unless you have sustainability.

But there was so much more to this. Let me unpack some story lines that this one actually very large company with a relatively small market cap of $36 billion gave you at the end of the week. It might be more lasting than anything else you hear today, even from the Oracle of Omaha.

Let's start with the amazing double-digit revenue and earnings growth that this company is giving you, along with a billion bucks in cash flow and undisputed market share leadership in the personal services/PC biz. This company has a staggering 23% share in the newly growing PC market, a gain of 1.7% share in a year. For those of us old enough to remember the battles among Compaq, Hewlett-Packard and Dell, these are staggering figures.

And this is no one-time spurt. HP has now delivered five consecutive quarters of revenue growth, and this amazing quarter actually laps 10% growth. So, it's a real mean feat.

But it would be wrong to contain the strength here to just personal computers. Printing systems are showing excellent growth, and gaming systems (powered by, Nvidia (NVDA) , of course), are doing quite well. Get these broader numbers: consumer growth 13%, commercial growth, 16%, notebooks up 14%, desktops up 17% and workstations up 11%.

Now, I know that story line may seem like old hat to those who have closely followed this amazingly focused company since it split from the old Hewlett-Packard Co. a few years ago.

But feast on this: HPQ is in full commercial production for actual, effective 3D modeling and creation of products. That's a $12 trillion market that's growing like wildfire, as manufacturing is just so much cheaper if it can be made 3D.

It's not "game over" -- many companies have this kind of technology. But when it comes to actual commercial production, I don't think anyone would argue that HP isn't the leader.

More importantly, I wonder how many investors are actually focused on this business line. It barely merited a single question on HPQ's very truncated conference call, despite the sector's important to the entire tech food chain and the simple fact that HP Inc. is doing more than $50 billion in revenue.

How is it happening? Some of it is pure ingenuity and design. As Dion said on the call: "If you look at the personal computer of five years ago, it's probably unrecognizable from the products that we make today."

Or as the always fabulous Chief Financial Officer Cathie Lesjak pointed out, the old PCs are "ugly."

I can attest to that. I love my EliteBook with its Intel Core 17 vPro. It bends, and it lets you scroll up and down by touch screen (and what an amazing feeling that is). The resolution is gorgeous, and yet the device is light and strong. The darned thing gives my Apple a run, and in some ways even exceeds it.

Why HPQ's Call Ignited All of Tech

Now, the analysts are always nit-pickers. They were far more focused on the gross margins (not as great as they'd like) and the currency gains (why not better given the dollar's weakness?).

But the big takeaway here is something that helped all of tech last week and will continue to do so -- raw costs; namely, the higher price of DRAMs (the basic building block of all personal computers).

Just last October at HPQ's analyst meeting, the company forecast that DRAM prices -- which have been much stronger for longer than anyone I know expected -- would level off. I thought of them going from headwind to tailwind.

But that didn't happen, and now HP Inc. says DRAMs could be strong all year. That's a remarkable change in stance, and it's why Micron (MU) took off and is now just a few points from striking its high.

It sure makes me feel better about buying MU at the current 5x price-to-earnings multiple. Remember, Micron's stock is ridiculously cheap if DRAMs stay strong, because the low P/E says that 2018 will be a down year. I didn't feel like that after listening to the demand side of HP Inc.'s call.

An analyst tried to get the company to go on the record as saying that NAND (think flash drives) could go higher as well, but HPQ management didn't bite. Still, I think that some of the advance in Western Digital WDC came from the fact that HP didn't forecast a down year for flash.

The impact? You saw some incredible action in the tech stocks that have felt so sketchy during this period, namely titans like Applied Materials (AMT) and Lam Research (LRCX) . I felt better about both after listening to this call.

Finally, there's the elephant in the room: cellphones versus PCs. As Dion said: "We see the mobile phone under pressure," which he said creates "capacity for investment in other areas" -- namely, what HP Inc. makes.

That's so key, as much of tech seems like it has a lid on it because the slower growth of all phones, including smart phones. But the overall tech market continues to grow; you just have to think outside of the cellphone box.

Those pondering the zero-sum nature of what you hear out of the Mobile World Congress in Barcelona should consider this call. It matters!

The bottom line? Simple: The HP Inc. earnings call ignited the rest of tech -- the part of tech people don't think about much any more. The tech that's on your desk and in your briefcase; a device that can look and act like nothing you ever thought possible even just a few years ago.

Random Musings

Thanks well-wishers. Yes, I loved the time off, but was gratified to stay in touch with the fabulous team we have in New York for RealMoney and

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