Hewlett-Packard (HPQ) is a well-known brand in the technology industry, which caters to a global audience. It is because it has built such a strong reputation for itself that it managed to attract a large number of investors in the stock market.
The industry is dynamic and has been growing exponentially over the years, allowing companies like Hewlett-Packard to grow and expand as well. Currently, the company looks financially strong, with an increase in last year's net profit margins as high as 5%.
It offers earnings and returns to its investors with relatively low risk involved, and pays steady dividends as well. In fact, it has been announced in the news recently that HP is one of the companies that will be increasing dividends for its stockholders this year.
A significant increase of 10% in dividends has been made, which has presented a positive picture for existing as well as potential investors in this company. Experts predict that this move by the new management will help in covering some of the ground that the company lost during the economic crisis. Sales had dropped, and income was relatively lower during this period, and the company is now trying to cover for that too.
Reports about the company's performance for this year look better than what had been expected by most experts and analysts. This is because HP had been facing some problems in the past two years while trying to diversify its business and restructure its operations along with the global financial and economic crisis that hit the international markets, taking its toll on profits as well.
It has started to recover from the losses that it faced and is again working on widening its competitive moat, which is necessary, in light of the high levels of competition that exist in this industry today. There is still however, some doubt in the minds of investors regarding whether they should consider buying this stock right now, as they feel it might be too early to predict a brighter future.
Some analysts and experts in the industry are convinced that Hewlett-Packard is a must-buy right now based on the current price and the announcement of a dividend increase. Despite the fact that revenues have been lower this year, they suggest that it presents a very positive picture due to rising net profit margins.
The new management is focusing on restrategizing and restructuring its operations for better efficiency and profitability. By streamlining its operations, HP plans to improve its financial outlook and stability. An example of this is the recent merger between the PC and printer unites, which had initially led to fear among its Chinese workforce about losing their jobs.
They believed that HP would probably be considering downsizing its workforce in China for this purpose. However, a Chinese newspaper has recently quoted the CEO of the company, saying that there are no such plans and there is no need for this fear.
My analysis of where the company will go from here is based on the current situation and the performance in the market. Looking at how it has managed to recover from all the problems that it had faced in the last two years, HP appears to be a strong investment now. It shows potential of growing further during this year with extensive plans for restructuring its operations and expansions. It is trying to explore new markets and segments in order to expand and diversify its operations.
At its current price, the stock offers better earnings and returns to its investors as compared to most of its competitors. It can work on improving further if it manages to sustain its growth from now on, which is what all its investors are hoping for. I will also be analyzing some of HP's major competitors in this article too as the comparison will provide a better insight about the market and the other options available to investors.
One of the most important competitors to consider here is Accenture (ACN) because of the way it has been performing. Since the beginning of this year, reports have been coming in about the company's excellent financial outlook.
Returns and earnings according to the financial highlights of this quarter are higher than what most of its competitors have managed. For stockholders, this suggests that they would get higher yields than expected and the competitors will have to watch out for this strong contender as well.
It has successfully managed to maintain a strong and stable position in the stock market while attracting a large number of investors. The fact that it has been able to sustain its growth is said to be the key reason behind its success by industry experts.
Dell (DELL) has not been performing as well as its investors would have hoped and it has been reported in the recent news that market insiders are now selling their stakes in this company. The company had made quite a name for itself over the years, but it seems that it is facing some problems in the stock market.
Also, the competition between Cisco and HP is one of the most intensive in the world of IT. Mike Banic, the VP of HP's marketing department said:
HP Networking is earning customers and taking market share from Cisco. Over the last three years, two-thirds of the market share Cisco lost went to HP. We have found that customers are tired of overpaying for legacy network equipment that lacks simplicity, openness and innovation.
Despite the fact that the company's revenues are steadily increasing with government orders coming in, it has still not performed well in the stock market. The sales volumes are significantly higher than they were in the previous two quarters but it still appears to be struggling to maintain its position.
When looking for alternative investment options within the technology industry, the name IBM (IBM) always comes into an investor's mind. This is because IBM has emerged as one of the largest and strongest company in this industry.
The way it has expanded and grown over the years is commendable and such levels of growth have rarely been achieved. However, due to the global economic crisis, the whole industry took a hit and this had an impact on IBM too.
The company's financial reports about its performance during the first quarter of this year suggest that earnings have been higher then estimated. Investors are pleased with the way met profit margins are improving but there is also a concern that revenue growth has not been up to the mark.
In such a scenario, potential stockholders often find it confusing to decide which investment option would be best suitable for them. The existing stockholders of HP should hold their position as there is a better chance of an improvement in the way it is performing. I predict HP stock will close in on the $30 level in the next 6 to 10 month time frame.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.