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The last time I looked at Hewlett Packard (HPQ), which was a month ago, I suggested breaking the thing up.

Most of you disagreed.

What you have is a stock with a super-cheap 8.7 P/E plus a 48 cent dividend yielding a payout of 1.36%, just short of the current price for 5-year Treasuries.

In cases like this your best play might be the debt, which is rated highly by Morningstar and sports coupon rates of up to 6.125%. The debt looks safe because HPQ carries a lot of cash – over $12.7 billion as of the end of April. That's almost enough to pay off the full long-term debt load of $15.7 billion, most of which carries a maturity of less than five years.

But what about the stock and what about the company?

Since hiring Leo Apotheker last September, tech reporters like me have continued to report bad news. HP's enterprise computing unit is troubled by Oracle's (ORCL) decision to stop supporting HP hardware built on Intel's (INTC) Itanium chip, a power play designed to move companies to Oracle's own Sun servers.

The good news here is that open source EnterpriseDB is offering to migrate customers to its software, but many customers will be leery of putting their database in the hands of such a small company. (It's privately held, is it worth buying? Maybe, but that would not be material to the total HP business.)

HP's mobile and tablet business has become a shambles. It's based on webOS, acquired with Palm Computing, and pushing former Palm CEO Jim Rubenstein out, in favor of PC group head Stephen DeWitt, is not calming customers' nerves.

HP does have some business that is doing well. Printers are doing well. Data storage is doing well. The former EDS unit is doing well. In a recent interview, Apotheker talked mainly about cutting costs and the “reluctance” of customers to buy.

Tech tends to be a fashion business, and HP is out of fashion. Apotheker has some irons in the fire – prying Samsung (OTC:SSNLF) away from Android toward webOS, and moving more toward cloud computing through EDS. If something like that works out, HP has some upside.

But there's a reason companies become dirt cheap. In HP's case these are good reasons. For someone with a conservative portfolio, HPQ is a bargain that's hard to refuse. But if you want to make some serious money, look elsewhere.

Source: Hewlett Packard Dirt Cheap, But Dead Money?