Hewlett-Packard Watchers Fret R&D Shift

This doubt is reflected in H-P's relatively modest multiple of 16.5 times 2007 earnings, compared with other large-cap tech players such as Apple(AAPL Quote) and Cisco Systems(CSCO Quote), which recently commanded multiples of 28 and 20 times earnings, respectively.

H-P's stock is trading at multiyear highs, but without a clear sign of future growth opportunities, investors' enthusiasm for the stock has limits.

Some new opportunities may come from outside of Palo Alto, Calif. On Monday the company announced plans to open a new research facility in St. Petersburg, Russia -- H-P Labs' third international outpost to be established in the past five years.

And though total R&D spending has lagged revenue growth in recent years, H-P has found other ways to tap into innovation, relying on its $16 billion war chest and $115 billion market cap.

In the past year, H-P has made a string of acquisitions including Mercury Interactive, VoodooPC and Bitfone, among others.

"We have smart people, and given enough time they can get it done. But the market passes you by if you take too much time," Robison says.

The tack plays well to H-P's increasingly diversified business, much of whose future growth, say analysts, will come from software and services. In those markets, M&A is as expedient a tool for growth as internally developed R&D.