Hewlett-Packard Company (HPQ): Even If Icahn Doesn’t Buy, Should You?

Page 1 of 2

Hewlett-Packard Company (NYSE:HPQ) was up as much as 5% earlier this week on rumors that billionaire Carl Icahn might be buying up shares. Icahn is one of the best corporate raiders around, but we are not ready to jump head first into HP on the idea that he might be ramping up for a campaign (check out Carl Icahn’s newest picks).

Carl Icahn

In order to trigger a 13D filing with the SEC, Icahn would have purchase up to 5% of HP’s common stock outstanding. This would require an approximate $1.4 billion investment on Icahn’s part, which would put HP as one of Icahn’s top 13F investments. With the apparent exit from Oshkosh, Icahn will be freeing up time and several hundred million dollars that could be used toward another investment, but we do not see it at HP.

HP posted 3Q results that saw EPS beating estimates despite lower order renewals and large write-downs. The restructuring initiatives will likely result in continued weakness and write-downs, as the company focuses on core operations to find its next major growth avenue. The past quarter showed some shifting of strategic priorities to restructuring efforts, which has in part put the stock down over 20% in the past three months.

The printer business is facing intense competition, with top competitors Lexmark and Canon becoming more aggressive, and refill options for ink now at very low costs. Restructuring initiatives should save HP upwards of $3.5 billion over the next half-decade, driven by the layoff of 25,000+ employees through 2014. These savings are expected to be reinvested in new growth opportunities, particularly cloud computing. The company’s already diverse product portfolio – PCs, printers and software – should also help to alleviate some pressure.

HP also has a market leading position in the computer equipment business with over 25% of industry-wide revenues, ahead of top rival Dell. Billionaire Jim Simons – founder of Renaissance Technologies – is one of Hewlett’s big backers, upping his stake over 3,500% last quarter (check out Jim Simons’ other top picks).

Dell Inc. (NASDAQ:DELL), meanwhile, is one of HP’s top competitors and should see revenues down around 10% in FY2013. This decline will be driven by weakness in its PC segment, on both the consumer and business sides. The overall economy and competitive low-cost pressures from Asian manufactures are expected to also be major pressures. One bright spot for Dell, though, is the expected rise in server sales. Billionaire Ray Dalio is curiously a big fan of Dell, as he increased his stake in the company by 50% last quarter (see all of Ray Dalio’s picks here).

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!