HP’s Autonomous Acts
Shaleen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Hewlett Packard (NYSE: HPQ) delivered poor Q4 and full year results for fiscal 2012, much of which was largely due to disclosure related failures and misrepresentations at Autonomy Corporation, which HPQ acquired in August 2011 at 79% premium over its stock price. The U.S. computer giant announced an $8.8 billion impairment charge write-down and attributed more than $5 billion of that to accounting practices at Autonomy.
The Company witnessed declining revenues in most of the products and services it offers. Printing revenue was down 5%, while the Enterprise Servers, Storage, and Networking (ESSN) revenues declined 9% year over year (YoY). The Personal Systems and Services (comprising of IT outsourcing, Technology Services and Application & Business Services) revenues also declined 14% and 6%, respectively, when compared to the last fiscal year. HP’s Financial Services revenue was up a percent from the same period a year ago, and its Software revenue increased 14% YoY. HP’s fourth quarter earnings stood at $1.16 per share, down by a cent from a year ago.
HP faces stiff competition from Canon, Epson, Lexmark, and Samsung on its printing devices business front, while it has to compete against giants like Apple & Dell on its Personal Systems front. Moreover, the decline in demand for PCs has also taken a toll on its business. The stock is down more than 50% from levels a year ago, and amidst all the investigating going on for accounting fraud I would prefer to stay away from this stock for a while.
Can we Del(l)ve into something else then ?
Another player in the information technology industry, Dell (NASDAQ: DELL), posted weak Q3 results a while back. The poor results were mainly due to the shrinking PC market, which is also affecting other companies in the industry.
Dell's revenues were down 11% to $13.7 billion on a year over year basis on account of lower contributions from all the business segments. The operating income for the quarter stood at $589 million, representing a decline of 48% year over year, mainly due to a higher rate of increase in expenses than revenue. Earnings per share for the quarter were down $0.15 to $0.39 from the previous year’s figure. The company still hopes to hit the minimum EPS guidance of $1.70 for the year.
The mobility offered by smartphones and tablets has led to a decline in the sales of PCs. About 50% of the company’s business is tied to PCs. Dell has spent more than $12 billion on 18 acquisitions since 2009, adding corporate data centres to reduce its reliance on PCs, but we may not see major contributions from such acquisitions in the near term. The stock price has neared late recession levels, and I will wait for positive signs from the stock before buying it.
Let’s go the nutritious way!
It is said that ‘an apple a day keeps the doctor away,’ and it might be true this holiday season. Apple (NASDAQ: AAPL) could bring good news for investors, as the supply of its latest offering, iPhone 5, has completely caught up with the rising demand this season. Barclays Capital’s Ben Reitzes believes that sales of the iPhone 5 could hit 50 million this quarter, higher than his earlier estimate of 43.5 million units. Another offering from the stable of Apple is the iPad mini, which is expected to sell over 6 million units, according to analysts.
The holiday shopping season may also see Apple’s earlier devices being sold at discounted prices, which will help it deliver a nice sales figure at the end of the quarter. The stock is down to $560 from a high of $702.01 it touched in September and I think that it’s just the right time to buy shares of the tech giant.
The tech space isn’t looking very promising. HP and Dell have been hit hard by falling PC business, which could be attributed to the growth of smartphones and tablets that offer ease of use and mobility. Moreover, these companies wouldn’t be releasing gadgets that have the potential to become popular all of a sudden. HP is definitely not a buy in the short run. Dell, on the other hand, would make for a good long term acquisition once the stock shows signs of a positive move. Apple, which is trading at a P/E of 12.72, with a dividend yield of just under 2%, might prove to be a good addition to your portfolio.
shaleenlohia has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple and Dell. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!