With Apple (NASDAQ:AAPL) products gaining a lot of attention around the world, computer stocks like Hewlett-Packard (NYSE:HPQ) have taken a beating. HP earnings dropped a shocking 44% in the first quarter, and new CEO Meg Whitman's arrival heralded a steep decline in sales last fall and into the winter. Meanwhile, Apple EPS stands at an impressive 82% this year, compared to HP's, which is 10% in the red. This comparison shows me just how much of an effect Apple has had in the technology market.
However, it looks to me like even though HP might still have a few tricks up its sleeve, these may be more of a death rattle than actual potential for recovery. Reports indicate that the company intends to boost its purchasing of Taiwanese electronics by 25% to reach $30 billion in expenditures. I am not really sure what HP thinks is the point of such a move. At a time when the company should be looking to cut costs, increasing the amount of money it is spending in certain areas seems like a bad idea to me. As it changes its webOS system to an open-source operating system, HP has managed to fire some of its staff, although I think that in the age of Occupy and others pushing for corporate responsibility, this might just make people angry. Consumers could turn against a company that they perceive as mistreating employees, especially one as big as this.
Cutting out jobs can often be considered streamlining of business operations so that money can be spent elsewhere, but in this case, I would say that HP seems to be making adjustments that probably will not have much of a positive effect on profits. The reduction in employees will be negated by the loss of sales on webOS, even though it was never very productive to begin with.
Teradata (NYSE:TDC) also operates in the diversified computer systems industry, and this company looks ready to top its 52-week high. It recently teamed up with The Boeing Company (NYSE:BA) subsidiary Narus to provide what could be some of the best cyber intelligence products available. Recently, Teradata has acquired a list of partnerships in this vein. I think this is an excellent strategy for minimizing costs for maximum return. It could be argued that the profits must be split, but since top people from both companies will be involved in a given project, the result should be something that consumers and businesses really want to buy, in my opinion. Teradata also just launched the company's latest database, Teradata Database 14, the revenue from which should push up its stock value. Furthermore, we just saw a long term double bottom for Teradata, so I expect that investor psychology has switched to a bullish attitude. Another point in Teradata's favor comes from major online retailer Nissen Co., Ltd. (OTC:NSELF). Based out of Japan, this company has decided to use an integrated data warehouse (IDW) from Teradata. If big buyers like Nissen are jumping on board, I see no reason for investors to hold back.
Unfortunately for HP investors, IBM (NYSE:IBM) would have been a better place to put their money, since its shares are currently priced at around $199. For those who bought into IBM in the fall, this represents an increase of more than $40 per share. Right now, this company is more valuable than it has been in years, and it looks to me like this trend is going to last awhile. The biggest advantage that IBM has over HP is that it has been focusing on creating apps and other systems for Apple products. In fact, according to ZDNet's Eric Lai, IBM could have "largest Apple deployment out there, and the second-largest iOS mobile device deployment. To me, this means that IBM will be pushing out HP on the application level, just as Apple has done for hardware. This is bad news for HP investors, in my opinion. I would say this is a good time to sell off HP and buy into IBM.
That being said, unfortunately, in my opinion investing in IBM at this point is equivalent to switching over to rooting for the other team halfway through a basketball game, just because they are winning. It is a little late in the game to make a real short-term profit off IBM, but anyone with the patience to hold on for a while could potentially make some real gains. Dividends will be paid out to IBM investors at $0.75 per share on March 10th, so any new investors will have to wait for the next payout.
The bottom line is that HP no longer seems like a competitive company, to me. Nothing that it is trying in order to revitalize its stock value seems to be working, and Apple and IBM look like they are eating up its market. Meanwhile, Teradata and others are doing well on the business management side of the computer industry, so there really does not appear to be much left for HP to do. Unless it can come with a completely new angle on software, databases, or some other form of computer system, its feeble attempt at making a profit by laying off workers is not going to get it very far, in my opinion.
In my view, Apple and IBM are the real money-makers these days, but Teradata has a strong financial position right now, by the look of things. It is always an interesting day when a giant like HP starts to decline. One day, I believe, people will hardly even be talking about HP anymore, because their focus will be too set on the real competitors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.