Is this the Dow's Worst Stock?
Shaunak is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If there was one company I would never buy, it would be Hewlett-Packard (NYSE: HPQ). This year has not been good to Hewlett-Packard, and it got worse on Oct. 3 when shares fell to a 9 year low after taking a 13% hit. Its stock has been plummeting recently, with a year-long drop of about 40%.
Wall Street Let Down
Meg Whitman was entrusted with HP's future to turn things around and recommit the company to the PC business. She was expected to make changes that translated into results, which wasn’t too much of an expectation considering what she had already accomplished at eBay.
Whitman's agenda for the company's turnaround did not go over well with the investors. Her plan was to have HP concentrate on corporate customers, narrower product lines and multi- featured machines—namely printers that double as scanners. Honestly, this didn’t surprise anybody, which may have contributed to investors losing interest in the firm.
Imagine this: You need to recover the $90 billion you have lost for the past three years and all you offer is a printer/scanner? Seriously!? How can HP expect to meet analyst's projections, investor expectations and customer demands with a plan like this?
With the advent of tablets and smartphones, the PC market has been taking hits, and customers have been losing interest in it. Demand for PCs is far below what PC giants like Dell (NASDAQ: DELL) and HP would hope for. HP's projection of a steep fall in profits affected Dell as well; in fact, Dell hit a 52-week low soon after Whitman's projections. Talk about dragging everybody down!
Dell recently closed the acquisition of Quest Software for $2.4 billion. The purpose of the purchase was to increase Dell’s product range, extending its reach to the smartphone and tablet market as well. This acquisition does not indicate in any way that the company is pulling out of the PC business.
In fact, Dell introduced the PowerEdge C8000 series of servers to support high-performance computing and big data applications. The servers will not only facilitate space and energy saving, but also improve data center performances at a high temperature. So all hope is not lost for Dell, as the acquisition and openings in new sectors will catalyze its growth.
Unfortunately for HP, to put it bluntly, it has nothing new or exciting to offer in the next year, and apart from hoping to make it big in the high-margin enterprise solutions market it doesn’t have too many things going on. With Oracle (NYSE: ORCL) offering a cloud service that lets companies rent processing power, storage, database software and business applications from the company instead of buying them outright, HP can lower its hopes of making it big there as well.
In a tablet market dominated by Apple’s iPad and Android-based devices, Hewlett- Packard is seeking to compete by offering a tablet for business users: the ElitePad 900. The company will begin selling the tablet, which runs on Microsoft’s Windows 8, in January. The tablet comes complete with software that emphasizes security and the ability to run business applications.
In a drive to shore up profit HP announced plans to cut 29,000 jobs by the end of fiscal 2014 to save as much as $3.5 billion. Revenue from enterprise services will drop as much as 13 percent in the next fiscal year, Hewlett-Packard said.
Keep your distance from HP; it doesn’t seem to have any plan to make any progress for the next few years.
Shaunak88 has no positions in the stocks mentioned above. The Motley Fool owns shares of Oracle. 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.If you have questions about this post or the Fool’s blog network, click here for information.