HP Could Be A Hidden Beneficiary Of Yen Devaluation
Adam Levine-Weinberg • 15 Comments
Adam Levine-Weinberg • 15 Comments
Sep. 30, 2015, 4:41 PM
- HP (NYSE:HPQ) is selling at least $14B worth of debt through its HP Enterprise unit, which will become a standalone/publicly-traded company (along with the HP Inc. PC/printing unit) on Nov. 1.
- In a sign Enterprise will have a weaker credit profile than HP Inc., Bloomberg states the debt is being offered at a premium to HP's existing bonds, A source indicates the offering could feature 10 parts, including 30-year bonds yielding as much as 3.6% more than comparable Treasurys, or 0.51% more than what similar HP debt yields today.
- The proceeds will be used by the parent company to redeem up to $8.85B in debt and refinance other obligations. HP ended its July quarter with $17.4B in cash/investments, $14.5B in long-term debt, and $11B in notes payable and short-term borrowings. The company previously forecast HP Inc. will have $2.3B in net debt following the breakup.
- HP rose 3.9% in regular trading. The Nasdaq rose 2.3%.
Sep. 28, 2015, 12:31 PM
- The Nasdaq is down 2.3%, but Intel (INTC +0.3%) remains up slightly. Possibly helping: Pac Crest's Mike McConnell (Overweight rating, $35 target) reports September notebook shipments appear set to top expectations by 5%-10%, that desktop motherboard makers are seeing improved demand from OEMs, and that server-related chip demand from cloud service providers is rebounding strongly following a recent slowdown.
- Citi and Wells Fargo argued PC demand is stabilizing earlier this month, while citing healthy August sales data from Taiwanese contract manufacturers. Windows 10 launched on July 29, and Intel began a large-scale rollout of its 14nm Skylake CPUs 4 weeks ago.
- PC sales expectations have been depressed: IDC estimates shipments fell 11.8% Y/Y in Q2 and 6.7% in Q1, and has forecast they'll drop 8.7% over the whole of 2015 to 281.6M.
- In other Intel news, Digitimes reports Intel, which has been looking to narrow its heavy mobile chip losses, plans to end price discounts (reportedly ~$4 for Windows tablets and ~$8 for Android tablets) for its 22nm Bay Trail Atom CPUs in October. Bay Trail CPUs are said to carry a list price of $12, and 14nm Cherry Trail Atom CPUs (discounted by $2-$3) a list price of $15.
- Related tickers: MSFT, AMD, NVDA, HPQ, MU, STX, WDC, HTCH
Sep. 20, 2015, 11:03 AM
- HP (NYSE:HPQ) recently announced that it would cut around 30K jobs, but despite its size, the corporate layoffs are not the largest of the recent past.
- According to outplacement firm Challenger, Gray & Christmas, the following list can claim that distinction.
- IBM (NYSE:IBM) layoffs: 60K - July 1993
- Citigroup (NYSE:C) layoffs: 50K - November 2008
- Sears (NASDAQ:SHLD) layoffs: 50K - January 1993
- General Motors (NYSE:GM) layoffs: 47K - February 2009
- AT&T (NYSE:T) layoffs: 40K - January 1996
- Ford (NYSE:F) layoffs: 35K - January 2002
- Kmart (SHLD) layoffs: 35K - January 2003
- Circuit City layoffs: 34K - January 2009
- Boeing (NYSE:BA) layoffs: 31K -September 2001
- Bank of America (NYSE:BAC) layoffs: 30K - September 2011
Sep. 16, 2015, 12:36 PM
- Down in AH trading yesterday after hosting its 2015 analyst day and stating it's cutting another 25K-30K jobs from what will soon be known as HP Enterprise, HP (NYSE:HPQ) is singing a different tune today.
- The IT giant followed up on its FY16 (ends Oct. '16) Enterprise guidance by providing guidance for its HP Inc PC/printing unit: The company is expected to post FY16 EPS of $1.67-$1.77 and free cash flow of $2.5B-$2.8B, with up to 75% of FCF returned to shareholders via buybacks and $865M worth of dividends.
- HP states HP Inc.'s markets are "likely to remain tough for the next several quarters with continued competitive pricing in printing and soft demand in PCs." The company aims to offset a secular decline in printer/supply sales via its Ink in the Office and managed print services, graphics investments, and expansion into the A3 copier market. HP's first 3D printer is still set to launch in 2016.
- Between them, HP Enterprise and HP Inc. are expected to see FY16 EPS of $3.52-$3.72. Consensus is at $3.72.
- UBS' Steve Milunovich (Buy) notes the companies are expecting nearly $7B in normalized FY16 FCF between them. "We believe [HP Enterprise] could notch low single-digit revenue growth over time with slightly faster profit gains as the mix shifts from lower-margin servers to storage and services ... However, we were not impressed by HP’s cloud discussion or claim of being uniquely positioned to help customers ... Almost 80% of [HP Inc.'s] profit is from printers ... Longer term we are impressed by HP’s potential to take share from copiers and become the 3D printing leader."
- Needham's Richard Kugele (Hold) is more worried about top-line pressures. "The ability to return to even GDP-level growth is not preordained for HPE or HP, Inc ... While some are focused solely on cash flow generation, we see a company that is the target of hungry competition in many of its most critical markets, and we are reluctant to just assume success ... In terms of HP, Inc., while we believe the growing dividend story may play out over time, in the near-term multiple quarters of headwinds for both PCs and Printing are a concern and weigh on our view of the stock."
- Analyst day slides
Sep. 15, 2015, 5:42 PM
Sep. 15, 2015, 4:57 PM
- The pre-spinoff HP (NYSE:HPQ) hasn't been shy about carrying out major job cuts ... and neither will the post-spinoff HP Enterprise: 25K-30K workers are expected to leave HP's enterprise IT ops, "primarily" from its slumping Enterprise Services (ES) unit.
- $2B/year in cost savings are targeted for ES - a 7%-9% long-term op. margin is targeted for the business, up from FQ3's 6% - and another $700M in "ongoing cost savings" for Enterprise overall that are associated with HP's breakup into Enterprise and the HP Inc. PC/printing unit (still set for Nov. 1). $2.6B worth of cash restructuring costs are expected over 3 years.
- The announcement has been made during HP's 2015 analyst day. Also announced: Enterprise expects FY16 (ends Oct. '16) EPS of $1.85-$1.95, and free cash flow of $2B-$2.2B ($3.7B exc. separation and restructuring charges).
- Enterprise expects to return at least 50% of its FY16 free cash flow to shareholders via buybacks and $400M worth of dividends. Revenue is forecast to grow in constant currency. However, forex is expected to have a 3% impact on dollar-based revenue growth.
- HPQ -1.1% after hours to $26.80.
- Analyst day slides
Sep. 2, 2015, 5:27 PM
- Ahead of the Nov. 1 spinoff of its PC and printing ops, HP (NYSE:HPQ) has named Enrique Lores, currently the head of its EMEA PC business, its new printing division chief. He replaces Stephen Nigro, who will now lead a newly-created 3D printing unit. Various lower-level executive positions have also been reshuffled.
- Both Lores and Nigro will report to Dion Wiesler, set to be the CEO of the HP Inc. PC/printing spinoff. The shakeup comes a month after HP reported its printing revenue fell 9% Y/Y in FQ3 to $5.11B, and 11 months after the company unveiled a 4-step inkjet 3D printing process (called Multi Jet Fusion) said to be both faster and cheaper than rival technologies.
- Separately, Reuters reports HP is exploring a sale of its TippingPoint security appliance unit, which sells next-gen firewalls, threat-prevention systems, and intrusion prevention systems. Sources state P-E firms have expressed interest, and that the business could fetch $200M-$300M.
- Reuters adds HP is "reviewing all parts of its business to find assets that may not fit into the separate companies" created by its breakup. Corporate security appliance demand has been healthy, thanks in part to a string of high-profile cyberattacks, but the market is also intensely competitive. Notable players include Cisco, Check Point, Juniper, Palo Alto Networks, Fortinet, and FireEye.
Aug. 26, 2015, 4:21 PM
- The Nasdaq has closed its latest ultra-volatile day up 4.2%. Chip stocks, hit hard in recent weeks amid China/inventory concerns, were among the standouts (SOXX +5%) during the rally: Big gainers included Nvidia (NVDA +7.5%), Skyworks (SWKS +6.9%), Qorvo (QRVO +5.9%), Xilinx (XLNX +6.3%), Analog Devices (ADI +7.1%), Linear (LLTC +6.1%), SanDisk (SNDK +7.4%), ON Semi (ON +6.2%), and Cavium (CAVM +5.6%).
- Cybersecurity plays and various other enterprise tech names also did well. Standouts included HP (HPQ +5.5%), Palo Alto Networks (PANW +6%), Rackspace (RAX +9.8%), Red Hat (RHT +5.9%), KEYW (KEYW +8.1%), Brocade (BRCD +5.6%), ShoreTel (SHOR +5.7%), Violin Memory (VMEM +14.7%), and Rapid7 (RPD +7.2%).
- In addition to HP, tech large-caps turning in big gains included Apple (AAPL +5.7%) Microsoft (MSFT +5.5%), Google (GOOG +7.7%), and Intel (INTC +5.5%). Google benefited from a Goldman upgrade.
- KEYW announced a CEO change yesterday afternoon. HP and Brocade are adding to last week's post-earnings gains. Skyworks/Qorvo peer Avago has posted an FQ3 beat after the close.
Aug. 21, 2015, 10:13 AM
- Hewlett-Packard (HPQ +5.9%) results didn't blow anybody away and guidance was light (UBS and Mizuho cut price targets just after), but the stock was already lower by more than 30% this year, including about a 10% dip in the sessions leading up to last night's report.
- Jim Cramer: There's a stock that isn't down, because it was down 20% going in and didn't disappoint. That's what I'm looking for."
- CEO Meg Whitman on CNBC: "I don't think so," she responds, when asked if there's any hope for growth in PCs in the near term. "This is a volatile business, anything can happen," she answers when asked if she can guarantee no more negative surprises, particularly as they relate to cash flow/separation costs.
- Previously: PCs, printers, services weigh on HP's sales; job cuts lift EPS again (Aug. 20)
- Previously: HP posts mixed results, issues light guidance (Aug. 20)
Aug. 20, 2015, 5:41 PM
- HP (NYSE:HPQ) is down 0.9% after hours after posting mixed FQ3 results and issuing light FQ4 guidance. With shares having made fresh 52-week lows today ahead of earnings, a lot was priced in.
- PCs: Ahead of its Nov. 1 PC/printing spinoff, HP's PC division revenue fell 13% Y/Y in FQ3 to $7.49B, as weak industry demand took a toll. Op. margin was 3%. Notebook revenue -8%, desktops -20%, workstations -12%, other products -8%.
- Printers: Revenue -9% to $5.11B, hurt by the secular impact of online/mobile photo and document sharing. Op. margin of 17.8%. Supplies -6% to $3.46B, commercial hardware -11%, consumer hardware -24%.
- Enterprise Services: Revenue -11% to $4.98B. Op. margin of 6%. IT outsourcing -13%, app/business services -7%.
- Enterprise Group (IT hardware): Revenue +2% to $7.01B. Op. margin of 13%. x86 servers +8%, high-end servers -21%, storage -2%, networking (boosted by the Aruba Networks acquisition) +22%, tech services -9%.
- Software: Revenue -6% to $900M. 20.6% op. margin. License revenue -11%, support -3%, professional services -8%, SaaS -4%.
- Financial Services: Revenue -6% to $806M. 10.8% op. margin. Net portfolio assets -2%.
- Financials: Giving a lift to EPS: Job cuts led GAAP SG&A spend to fall 13% Y/Y to $2.96B (echoes of FQ2). R&D spend rose 1% to $893M. Gross margin fell 20 bps Y/Y to 23.8%. Op. cash flow fell 54% to $1.7B.
- $352M was spent to buy back 11M shares. HP ended FQ3 with $17.4B in cash/investments, and $14.5B in long-term debt.
- FQ3 results, PR
Aug. 20, 2015, 4:08 PM
- Hewlett-Packard (NYSE:HPQ): FQ3 EPS of $0.88 beats by $0.03.
- Revenue of $25.35B (-8.1% Y/Y) misses by $90M.
- Expects FQ4 EPS of $0.92-$0.98, below a $1.00 consensus.
- Shares -0.8% AH.
Aug. 19, 2015, 5:35 PM
Aug. 12, 2015, 9:40 AM
- Hewlett-Packard Enterprise's board will be chaired by ex-Alcatel-Lucent CEO Pat Russo. The other directors are CEO Meg Whitman, GM president Dan Ammann, VC Mark Andreessen, ex-Comcast CFO Michael Angelakis, Sarr Group CEO Leslie Brun, ex-Cummins Distribution president Pamela Carter, Alcoa CEO Klaus Kleinfeld, VC/ex-HP chairman Ray Lane, ex-HP exec Ann Livermore, software industry vet Ray Ozzie, and Cadence Design CEO Lip-Bu Tan.
- HP Inc. (the PC/printing spinoff) will be chaired by Meg Whitman. The other directors are CEO Dion Weisler, ex-Booz & Co. CEO Shurmeet Banerji, Autodesk CEO Carl Bass, ex-Liberty Media CEO Robert Bennett, Levi Strauss CEO Chip Bergh, TaskRabbit COO Stacy Brown-Philpot, ex-Dow Corning CEO Stephanie Burns, Blackstone adviser Mary Anne Citrino, ex-Rohm and Haas CEO Rajiv Gupta, ex-DuPont exec Stacey Mobley, and Carnegie Mellon president Subra Suresh.
- HP (HPQ -2.6%) has already set management teams for the two companies, and announced the breakup will officially take place on Nov. 1, following the end of its current fiscal year. FQ3 results arrive on Aug. 20.
Jul. 30, 2015, 9:12 AM
- Hewlett-Packard (NYSE:HPQ) declares $0.176/share quarterly dividend, in line with previous.
- Forward yield 2.32%
- Payable Oct. 7; for shareholders of record Sept. 9; ex-div Sept. 4.
Jul. 29, 2015, 5:45 PM
- Leidos Holdings (NYSE:LDOS) spiked to a 5% gain just minutes before the close, after the U.S. Defense Department said it chose a team led by the company to build a new electronic health record system for 9.6M current and retired military service members.
- The contract has an initial value of up to $4.34B and runs for 10 years, the Pentagon says.
- LDOS and Cerner (NASDAQ:CERN) beat out a team of IBM and Epic Systems, and another team that included Allscripts (NASDAQ:MDRX), Hewlett-Packard (NYSE:HPQ) and Computer Sciences Corp. (NYSE:CSC)
Jul. 15, 2015, 5:19 PM
- Intel (up 2.4% AH) beat Q2 estimates and provided better-than-expected Q3 and full-year guidance. The chip giant reported a 14% Y/Y drop in PC/mobile CPU division sales, and a 10% increase in server CPU division sales.
- Various names with PC and/or server exposure are following Intel higher. HP (NYSE:HPQ) +1.2% AH. Micron (NASDAQ:MU) +2.2%. AMD +2%. Nvidia (NASDAQ:NVDA) +1.3%. Mellanox (NASDAQ:MLNX) +1%.
- Micron fell 3.7% in regular trading, after having surged yesterday on a WSJ report about a buyout offer from China's Tsinghua Unigroup. John McCain let it be known today he isn't thrilled with the idea of a Chinese company acquiring "the last major American manufacturer of memory chips."
- AMD is 9 days removed from plunging on account of a Q2 warning. The Intel rival's Q2 report arrives tomorrow.
HP Inc. provides products, technologies, software, solutions and services to individual consumers, small and medium-sized businesses and large enterprises, including customers in the government, health and education sectors. It operates through seven business segments: Personal Systems,... More
Industry: Diversified Computer Systems
Country: United States
Other News & PR