Hewlett-Packard: Let's Think About Financing Assets

Hewlett Packard (HPQ) came out with Q3 numbers which they should be proud of. Investors rewarded themselves by bidding up the stock and declaring the enterprise value has increased. Much of the positive results come from non-US earnings. In what has become a very common comment on many earnings releases, revenues for operating units in Asia and Europe, Middle East and Africa (EMEA) were substantially ahead of what the domestic US operations could deliver. Roger so far, nothing new we think.

The long term financing of receivables and other assets has increased by 35% from approximately $7.6 billion as of Oct. 31, 2007 to $10.3 billion on July 31, 2008. Revenues were not up 35% during the comparable time frame. We need greater clarity on what is happening within the finance unit and how the assets are allocated.

US-oriented investors normally think of financing in terms of American/Euro-centric jurisprudence. If someone reneges on his laptop lease from a small tropical country, what recourse does H-P have? They may not care about their credit ratings.

Comments

[sane_man:]

Nice observation! Credit boom spreading to technology sector too?

2008 Aug 20 06:31 PM

[diligent:]

I looked into this. The category is called 'long-term financing receivables AND 'other' assets". Note 11 of HP's 10Q in Q108 shows they implemented FIN48 which caused them to reclassify tax assets into this bucket. The company breaks out financing portfolio assets in its 10Q on page 58. and the assets are growing less than revenue growth in financing so nothing to worry about.

2008 Aug 22 12:18 AM