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Hewlett-Packard (HPQ) and Cisco Systems (CSCO) have many things in common. They are both innovative technology companies that rode the high-tech bubble of the 1990s (though HPQ has been around much longer than CSCO), delivering their stockholders hefty gains. They took a dive in the early 2000s, as the high-tech bubble burst, only to recover slightly by the late 2000. They both face stiff competition in the upper-end of their business—Hewlett-Packard from IBM and Apple Computer (AAPL), and Cisco Systems from Juniper Networks (JNPR)--and from each other; and even stiffer competition at the low-end of their business by Chinese manufacturers—Hewlett-Packard from Lenovo and Cisco from Huawei. And they both relied on mergers and acquisitions to expand product portfolios—though Cisco more than Hewlett-Packard.

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But now this strategy doesnt seem to work well, as acquisitions became increasingly expensive and hard to integrate, and some of these acquisitions steered the companies away from their core-competence. In the case of Hewlett-Packard, some acquisitions grounded the company into a declining segment of the high-tech industry, like the acquisition of Compaq Computer, which expanded the companys presence in the PC business. Other acquisitions put the company onto a collision course against the industry pioneer, like the acquisition of wireless device maker Palm Inc. So what has the company leadership been doing in response?

Cisco has been taking gradual steps, fading out its consumer units, and shifting into an internal innovation model. Hewlett-Packard has taken bolder steps, spinning off its PC business, getting out of the mobile business, and buying Autonomy Corporation to expand into enterprise software, as announced Thursday, following a disappointing earnings report. Which strategy is going to enhance shareholder value?

It is up to the market to determine. In the meantime, I would stay away from both stocks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Waiting Out the Shift in Strategies at Hewlett-Packard and Cisco Systems