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Somebody Needs to Buy HP, Now

NEW YORK ( TheStreet) -- Michael Dell has good reason to take Dell (DELL - Get Report) private.

The public investor doesn't value it. Dell may be down but it's not broke. It still makes money. It has operations around the world and is re-focusing on cloud computing and computer services. It has growth prospects.

By taking his company private Dell can focus on those growth prospects without worrying about quarterly earnings, and without having to talk to people like me ever again. Many of our greatest companies are privately held, Forbes notes, from Cargill to Mars to Bechtel. With annual sales of $60 billion, Dell would be number three on the 2012 Forbes list.


Rival Hewlett-Packard's (HPQ - Get Report) reaction to this was a big nyaah-nyaah-nyaah, telling ComputerWorld confidently it's going to steal a bunch of Dell's customers due to all this "uncertainty."

But if any company on the planet should be concerned about a private equity takeout, it's HP.

While the equity value of Apple (AAPL - Get Report) and Microsoft (MSFT - Get Report) is more than twice their annual sales, and that of Google (GOOG) nearly five times more, HP's equity is worth barely more than one-quarter its annual sales. That's worse than retailers Target (TGT - Get Report) and Costco (COST - Get Report). It's worse than Dell.

Quartz reports that some on HP's board are now considering breaking the company apart, and HP management told Business Insider last month it might unload some weaker divisions.


The trouble is, HP is nothing but weak divisions.

Jon Xavier of Silicon Valley Business Journal recently ticked off the company's weak sisters and found himself listing the whole company.

There is value in HP, even if it's breakup value. Like an NBA team with expiring contracts, it can dump salary in the form of losses others could write off.

The company's official turnaround strategy, from an October press release, is to focus on cloud technology, data security and something called "information optimization." Mostly it's about using software to sell hardware, which is what Oracle (ORCL - Get Report) is doing. Only Oracle's database software is essential to its customers in ways HP's software simply isn't.

Speaking of Oracle, it is just one of several rivals that now have the power to buy HP, sell off the stuff that doesn't work and pocket the rest. Oracle's market cap is $167 billion, Microsoft's is almost $230 billion, IBM's (IBM - Get Report) is almost $227 billion. Contrast that with HP's $33.5 billion.

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AAPL $128.90 0.34%
COST $147.39 0.29%
GOOG $560.84 0.44%
HPQ $34.65 -0.55%

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