Looking forward, the yen’s depreciation will lead to lower costs for Hewlett-Packard Company (NYSE:HPQ)’s laser printers in the second half of 2013, because HP sources many components from Canon Inc. (ADR) (NYSE:CAJ) in Japan. This may be offset somewhat by stronger price competition from Japanese printer manufacturers such as Brother and Canon, but the net effect will probably be positive for HP.
Foolish bottom line
HP’s turnaround is not yet complete, but it is starting to make visible progress in areas such as printing. Moreover, the company trades for less than seven times projected earnings for the current year. Investors need to recognize HP’s PC business for what it is: a small (though highly visible) component of HP.
With the PC group already providing a very modest contribution to HP’s overall profitability, any future declines there could be easily offset by the company’s ongoing cost cuts and/or recovery of other business lines. While CEO Meg Whitman has repeatedly stressed that it will take a few years for this recovery to take hold, HP still seems like a bargain at its current valuation.
The article HP’s Strong Q2 Showcases the Growing Irrelevance of PCs originally appeared on Fool.com.
Fool contributor Adam Levine-Weinberg owns shares of Hewlett-Packard. The Motley Fool has no position in any of the stocks mentioned.
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