Wall Street Looks Beyond HP Scandal

Excerpt from our One-Page WSJ Summary:

HEARD ON THE STREET: Hewlett-Packard Shares Retain Luster Despite a Board Tarnished by Scandal

Summary: Hewlett-Packard (HPQ) is actually doing quite well. Despite all the attention being paid to the leak investigation scandal its stock has been holding its value, down only 1.3% since the scandal broke. In fact, since Mark Hurd took over as CEO last year, HP shares are up 72%. In the past year HP’s PC business managed to both increase its world-wide market share by 0.4%, to 14.8% (during the same period Dell only managed to eke out an 0.1% increase to 17.7%), and improve operating margins from 2.6% to 4%. Its printer business (which controls about half of the North American inkjet-cartridge market) operating profit increased by 15% in the fiscal third quarter, compared with a 7.8% decrease for the same period last year. HP's server/storage division doubled its fiscal third quarter operating profit by increasing its market share in both external storage (to 19.3%, probably at EMC's (EMC) expense) and blade servers (to 38.9%), where it now runs neck and neck with IBM (IBM). However, not all of HP’s divisions are doing this well. Its services group posted only a 1% increase in revenue in the last two quarters, and in the third quarter its software unit contributed only 0.8% ($13mm) to HP’s total operating profit, despite seeing a 30% increase in software sales during the same period.
Related links: Full WSJ article • All of Seeking Alpha's WSJ summaries on the HP scandal • Analysts Rallying Around H-P, Hurd • Comparisons Between Hewlett-Packard and Dell are Faulty at Best • Bear Stearns: Hewlett-Packard's Turnaround Story Continues With Another Strong Quarter • Canon and HP Weathering the Perfect Storm in Printing Market • HP's Purchase of Mercury: Both Sides Win • PC Shipments for 2Q06 Better Than Expected: Dell, HP and Apple Gain Share • Conference call transcripts: Hewlett-Packard Q3 2006
Potentially impacted stocks and ETFs: Dell Inc. (DELL), Gateway Inc. (GTW), Apple Computer Inc. (AAPL), Canon (CAJ) • ETF: Technology SPDR (XLK)

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