This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

HP Plan Requires 'Many' Acquisitions

HP story updated with spokesperson comment in the 11th paragraph.

NEW YORK (TheStreet) - Hewlett Packard's (HPQ) recent string of mergers may not end despite the C-suite drama. Unless it runs out of spending money.

Even after the $10.3 billion purchase of Autonomy and the board's decision to replace Leo Apotheker with former Ebay (EBAY) CEO Meg Whitman, the largest personal computer maker in the U.S. still must decide whether to continue a new strategy of tipping the balance of sales from P.C.'s to higher profit margin services and software businesses --a plan that may require more software acquisitions.

"To be the company Leo envisioned, you would need to do many acquisitions," said Richard Kugele, an analyst at Needham & Co in an email to TheStreet on Tuesday. As such, Kugele expects that Autonomy won't need to be integrated into HP "for a long time, if at all." About its P.C. business and operating system he added, "I suspect that if clearer heads prevail, the business may be kept (albeit now weakened). webOS should find a home because I feel it was a good OS, just needed some investment and MANY more apps. "

Whitman made it clear on her introductory call as the Palo Alto, California -based company's new chief executive that while a new leader was in place, HP would likely follow Apotheker's plan announced in mid-August. "I think the strategy is right. The initiatives that we undertook on August 18 are right," said Whitman. Responding to analysts questions about how long it will take for HP to solidify a strategy Whitman said, "The best thing we can do is get to a decision on PSG as fast as possible. This decision, it's not like fine wine. It's not going to get better with age."

With or without the P.C. unit, for HP to affect the change it's looking for in its Autonomy acquisition, the company will likely need to add to its software division through acquisitions and not merely synergies.

In a Monday statement, HP reaffirmed that Autonomy will be run independently and its founder and CEO Mike Lynch will continue to head the Cambridge, England -based software-maker, reporting directly to Whitman. Part of the reason Autonomy is running independently for now is only roughly 2% of current HP revenue comes from the software related businesses it's looking to build. With Autonomy revenue added, software will only be bolstered by roughly $1 billion or roughly 3% of overall revenue, a small piece of larger $100 billion-plus annual revenue that come from its overall P.C., printing and server & network businesses.

"On software, HP clearly has to be acquisitive," said Jeff Fidacaro an analyst at Susquehanna Financial Group in a phone interview Tuesday. "If they divest of the PC business, I think they will accelerate revenue from the software business to 10%," added Fidacaro, meaning acquisitions would be likely to "move the needle" in HP's overall software revenue distribution.

As HP built out its businesses like security software, handsets, storage and networking in recent years, it has a track record of acquisitions. Regardless of whether Whitman will spinoff, keep it or sell HP's P.C. division, -its single biggest division responsible for just under 31% of overall company revenue and the most ambitious piece of Apothekers vision, HP may continue down the merger path.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs