Why You Should Stay Away from Hewlett-Packard

Companies / Tech Stocks Oct 06, 2012 - 03:26 AM GMT

Hewlett-Packard Company (NYSE/HPQ) sank on Thursday after warning the market to expect less in 2013, as the former technology kingpin struggles to revamp its business.

The company has seen over half of its market-cap dissipate over the past year, rewarding the short-selling traders, according to my stock analysis.

CEO Margaret Whitman has a titanic job ahead of her, as she tries to turn the sinking ship around; but with crippling declines in the demand for PCs and intense competition in printers and other products, my stock analysis tells me that the path will be difficult and there is no guarantee of success.

My technical analysis of the chart of Hewlett-Packard (HP) tells the story of the company’s demise from a Wall Street darling to a misfit. Based on my stock analysis, the rapid switch between CEOs (there have been three since 2010 alone) has hurt the company’s business. HP had been in the retail tablet market, but it exited in August 2011 under the leadership of former-CEO Leo Apotheker, who took over in 2010 from Mark Hurd. Following the company’s departure from the tablet business, Apotheker was replaced by Whitman in September 2011, who now faces the daunting task of figuring out what to do to save the company.

Chart courtesy of www.StockCharts.com

According to Whitman, it will take years to turn HP around, as the company looks to streamline its product line and become a leaner, more efficient technology company. Yet, according to my stock analysis, the company’s lack of exposure in the surging mobile business is problematic. But this could change, as HP now has a dedicated group responsible for growing its mobile business; albeit, it may be too late, according to my stock analysis.

The PC market is dead, and HP will need to re-invent itself under Whitman’s five-year plan that predicts growth will return by 2015, but, based on my stock analysis, it will not be easy. PC growth is estimated at below one percent this year, according to International Data Corporation (IDC). And exacerbating the situation, the company’s management is expecting the worst. The PC market may not grow until 2016, according to HP’s Todd Bradley, head of the company’s PC unit.

HP-rival Dell Inc. (NASDAQ/DELL) is also finding the PC market extremely challenging.

My stock analysis tells me that Apple Inc. (NASDAQ/AAPL) is to blame for the turmoil and hardship that PC makers are experiencing, namely for laptops replacing tablets with its “iPad.”

Under Whitman, HP appears to be focusing on the business side of the tablet market, where the demand is high for tablets more powerful than Apple’s iPad. HP recently announced its new “Windows 8”–based “ElitePad 900” that caters to businesses, but may also be attractive to retail users who demand a more powerful alternative to the iPad and other tablets.

The early prognosis is that the ElitePad 900 is good, and it is expected to be launched in January 2013. The tablet will be powered by the “Atom” chip from Intel Corporation (NASDAQ/INTC), with two gigabytes of RAM, a 10-inch display, an eight-megapixel camera/video recorder. Overall, HP’s new tablet is intriguing. We will just have to wait to see how the market responds and whether Apple will come back with a more powerful iPad.

Good luck, Meg!

By George Leong
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

Copyright © 2012 Investment Contrarians- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.