Time To Sell HPQ!
The Dynamic Wealth Report
November 1, 2011
by Corey Williams, Editor
A few months back, I explained
why
Hewlett-Packard (HPQ) could become
the next great dividend growth stock.
At the time, HPQ’s former CEO, Leo Apotheker, had just announced the
tech giant was exiting the personal computer business. Apotheker said
HPQ planned to spin off their PC portfolio within 18 months.
The plan was pretty straightforward… HPQ was pulling out of consumer
products and focusing on enterprise products.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
Why?
The reason’s simple. Profit margins in the PC business are razor thin. So, it’s hard to make money even if you sell a boatload of computers.
On the other hand, business products like enterprise software, data
centers, and cloud computing offer hefty margins. So, HPQ can make a lot
more money on the same amount of sales.
In other words, HPQ was shifting their business model. They were moving
into the areas of tech with the most growth potential and profitability.
Sounds great, right?
I certainly thought so…
HPQ’s plan to spin off their PC business was very similar to what
International Business Machines (IBM) did in 2005. Back then, Big Blue
spun off their PC business to Lenovo (LNVGY).
And IBM’s decision to focus on higher-margin business services paid off
big time.
Since dropping their PC business, IBM has watched their stock soar by
more than 150%. Plus, they’ve increased their dividend from 20 cents to
a healthy 75 cents per quarter. A whopping 275% increase!
Any way you slice it, that’s an amazing dividend growth stock…
Obviously, owning IBM after they spun off their PC business was a great
investment. And it appeared HPQ was about to set off down the same path. If HPQ could garner even a fraction of the success IBM did, it would
become the next great dividend growth stock.
Unfortunately, HPQ didn’t live up to expectations.
Less than a month after Apotheker announced the decision to jettison the
PC business, he was fired. He lasted a mere 11 months on the job… And
HPQ replaced him with former eBay (EBAY) CEO, Meg Whitman.
The way I see it, Meg Whitman is a poor fit for HPQ. She lacks
experience leading a software and services business. And while she did a
great job with eBay, Whitman has never handled a company with the size
and complexity of HPQ.
Now HPQ is backtracking.
They’ve decided to remain in the PC business and restart production of
other consumer products. In other words, HPQ is staying in the lower
margin PC business and backing away from growing the higher margin
enterprise business.
More importantly, Hewlett-Packard is no longer following in IBM’s
footsteps. Simply put, HPQ is not the next great dividend growth stock.
The truth is… I don’t know what to make of HPQ right now. The company is
a mess. And it remains to be seen if Whitman is up to the challenge of
managing such a huge company.
As a result, I suggest cutting ties with HPQ. There’s just no reason to
own a floundering tech stock with falling earnings and no plan.
Share This Story:
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map