This Day On The Street
Continue to site
ADVERTISEMENT
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

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 - Get Report) 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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
TIBX $24.03 0.00%
EBAY $28.12 0.00%
INFA $48.52 0.00%
HP $57.74 0.00%
RHT $79.08 0.00%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs