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Hewlett-Packard Co. (HPQ)

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  • Jun. 12, 2014, 7:16 AM
    • "Our thesis has been proven wrong as H-P management has executed far more effectively than we anticipated," says analyst Bill Shope, throwing in the towel on Goldman's Sell rating for Hewlett-Packard (HPQ).
    • "Following H-P Discover in Las Vegas, we walk away incrementally more positive on the progress of the turnaround ... Restructuring efforts have gone a long way towards 'right-sizing' the cost base, providing a sustained buffer to our secular concerns."
    • Shares +1.2% premarket
    | 1 Comment
  • Jun. 10, 2014, 3:08 AM
    • H-P (HPQ) has unveiled a water cooling technology for its new Apollo family of server computers that run financial models and create complex designs. The innovation will replace energy gobbling power fans that previously stopped models from overheating.
    • The new design takes the heat out of the machine from a safe distance, unlike gamers’ machines that pump water near heat-generating processors. By keeping the water farther away, there will less likely be a leak on expensive components.
    • "The innovation opens the door for H-P to chase orders in a $4B segment of the market where it hasn’t had products before," says Antonio Neri, chief of the company’s servers business.
    | Comment!
  • Jun. 6, 2014, 6:40 PM
    • Thanks to a 25% drop in high-end storage spend, external disk storage and total disk storage sales respectively fell 5.2% and 6.9% Y/Y in Q1, says IDC. Those figures contrast with Q4 growth rates of 2.4% and 1.3%.
    • Market leader EMC, which depends heavily on its high-end Symmetrix line, saw its external share fall 110 bps Y/Y to 29.1%, and its total share fall 50 bps to 22.4%. EMC previously reported its high-end sales fell 22% in Q1; strong flash/scale-out storage sales partly offset the drop.
    • NetApp's (NTAP) low high-end exposure allowed its shares to grow 30 bps and 50 bps to 15.1% and 11.7%, in spite of a 2.8% revenue drop. H-P's (HPQ) external share rose 40 bps to 8.8% (3PAR strength), but its total share fell 20 bps to 15.1% (server weakness).
    • Things still look bleak for IBM, which reported a 23% Y/Y Q1 system storage revenue drop: Its external share fell 200 bps to 8.8%, and its total share 180 bps to 10.1%.
    • The total disk share of non-top-5 vendors rose 370 bps to 28.8%. Chalk that up to both surging demand for cloud storage (getting cheaper by the quarter) running on commodity hardware, and solid momentum for flash/hybrid storage upstarts such as Nimble (NMBL), Pure Storage, and Nutanix.
    • Hard drive/assembly suppliers: STX, WDC, HTCH
    | 5 Comments
  • Jun. 5, 2014, 7:40 PM
    • Dozens of companies, including IBM and H-P (HPQ), found an unwelcome surprise in their supply chains in their search for "conflict minerals," part of the Dodd-Frank Act designed ferret out any connection to mines controlled by armed groups in the Congo: Many of their products contain North Korean gold.
    • IBM, for example, disclosed that the North Korean gold was used to make its memory storage systems.
    • North Korea’s central bank provides currency for the country and refines gold, but U.S. sanctions law bars importing materials from the country, even if it comes from deep within a supply chain.
    • "There is still a long way to go in understanding supply chains," says an attorney who deals with conflict mineral disclosures.
    • Other companies making the discovery included Ralph Lauren (RL), Rockwell Automation (ROK) and Williams-Sonoma (WSM).
    | 5 Comments
  • May. 30, 2014, 6:41 PM
    • IDC estimates global server sales fell 2.2% Y/Y in Q1, a slightly smaller decline than the 4.4% drop seen in Q4. Gartner, however, puts the decline at 4.1%.
    • The embrace of white-label hardware by Web giants continues taking a heavy toll: IDC thinks white-label sales, which it calls ODM Direct, grew 75% Y/Y (up from Q4's 47% clip) and made up 7.3% of industry revenue, up from 6.4% in Q4 and 4.1% a year ago.
    • IDC estimates market leader H-P (HPQ) saw its share hold steady at 26.5%, after having grown (at IBM's expense) 260 bps Y/Y in Q4. #2 IBM, whose hardware sales have been battered, saw its share fall 600 bps Y/Y to 19.1%.
    • #3 Dell's share slipped 20 bps to 18%, while #4 Cisco (CSCO), which just reported a 29% Y/Y April quarter sales jump for its UCS server segment, saw its share rise 170 bps to 5.7%. #5 Oracle (ORCL), whose server sales are finally stabilizing thanks to engineered systems growth, rose 20 bps to 4.9%.
    • Sales of x86 servers, over 90% of which contain Intel (INTC) CPUs, rose 4.9% after growing 7.8% in Q4. Non-x86 server sales tumbled 25.2%, and now make up just 17.9% of industry revenue.
    • Cisco now has an estimated 24.4% of the blade server market, behind only H-P's 43.7%.
    | 11 Comments
  • May. 23, 2014, 10:47 AM
    • Credit Suisse and UBS have respectively hiked their H-P (HPQ +6%) PTs to $35 and $34 after the company posted an FQ2 revenue miss to go with in-line EPS, and announced fresh job cuts. Both cite positive earnings/cash flow trends.
    • CFO Cathie Lesjak mentioned on the CC (transcript) H-P had FQ2 free cash flow of $2.3B, soundly above net income of $1.7B. She added the company's cash conversion cycle fell by 3 days Q/Q to 13.
    • Lesjak offered more cautious remarks on PCs/printing: Toner sales are expected to "remain under pressure" for the rest of the year, and "higher component costs" (at least a partial reference to DRAM prices) are expected to pressure PC margins.
    • Enterprise hardware margins are still being dinged by a "competitive pricing environment," but Lesjak promises restructuring moves will yield better 2H profitability. From a top-line standpoint, the business has benefited from IBM's struggles, but is also hurt by rising demand for white-label hardware.
    • The new job cuts are expected to produce a $500M charge. Their impact on FY15 profitability won't be shared until the October analyst meeting.
    | 11 Comments
  • May. 22, 2014, 4:17 PM
    • After releasing its core results early, H-P (HPQ) has provided its full FQ2 report after the close. The IT giant guides for FQ3 EPS of $0.86-$0.90 vs. an $0.89 consensus, and FY14 EPS of $3.63-$3.75 vs. a $3.71 consensus.
    • H-P also announces it's increasing the size of its job cuts by 11K-16K positions. The company, which had ~317K employees last year, has already announced plans to shed 34K jobs.
    • $831M was spent on buybacks in FQ2, helping EPS meet estimates in spite of a revenue miss. Gross margin rose 50 bps Y/Y to 24.2%. R&D spend +7% Y/Y to $873M, SG&A spend +1% to $3.39B.
    • Contributing to the revenue miss: Printing revenue fell 4% Y/Y after falling 2% in FQ1, enterprise hardware fell 2% after growing 1%, and enterprise services once more fell 7%.
    • PCs were healthier (+7% vs. +4%, with 12% commercial growth offsetting a 2% consumer drop). As was software (flat vs. -4%, with 8% license growth). Financial services -2% vs. -9%.
    • High-margin printing supplies revenue fell 7%, while printing hardware units rose 1%. In enterprise hardware, a 6% drop in storage and a 14% drop in business critical systems (Itanium weakness) offset a 6% increase in networking. x86 servers rose 1%.
    • HPQ -1.2% AH after falling 2.3% in regular trading. FQ2 results, PR
    | 7 Comments
  • May. 22, 2014, 3:37 PM
    • Hewlett-Packard (HPQ -2.2%): FQ2 EPS of $0.88 in-line.
    • Revenue of $27.3B (-1% Y/Y) misses by $110M.
    • Press Release
    | 15 Comments
  • May. 21, 2014, 5:35 PM
  • May. 15, 2014, 9:02 AM
    • HP (HPQ) declares $0.16/share quarterly dividend, 10.2% increase from prior dividend of $0.1452.
    • Forward yield 1.94%.
    • Payable July 2; for shareholders of record June 11; ex-div June 9.
    | Comment!
  • May. 2, 2014, 1:34 PM
    • Joel Greenblatt's screen looks to find stocks with high "earnings yield" - a high ratio of profits to enterprise value. Companies are further screened for a strong return on capital. When a stock scores well with both criteria, it's usually a good company being undervalued by investors.
    • For picking individual stocks, there are probably better methods, but as a group, Magic Formula names have vastly outperformed the broad market.
    • Although defense names have done well over the past couple of years, the Magic Formula continues to identify Northrop Grumman (NOC +0.2%), General Dynamics (GD +1.4%), and Raytheon (RTN +0.6%) as attractive. Firearm names Smith & Wesson (SWHC +0.8%) and Sturm Ruger (RGR +0.3%) also make the cut.
    • A number of videogame makers show up as well: Take-Two (TTWO +0.3%), Activision Blizzard (ATVI +0.2%), GameStop (GME +2.8%), and the struggling recent IPO King Digital (KING -0.3%).
    • Not too surprisingly, the Magic Formula also continues to like plenty of big-cap tech names: Cisco (CSCO -0.2%), CA, Inc. (CA -0.5%), Microsoft (MSFT -0.5%), Hewlett-Packard (HPQ -0.5%), and Apple (AAPL +0.1%).
    • Hardly market laggards, media names like Time Warner (TWX -0.8%), Viacom (VIA +1.4%), Omnicom Group (OMC), and Starz (STRZA +2.3%) also show up on the list, as do struggling multi-level marketers and for-profit education stocks: HLF, NUS, APOL, ESI, CPLA.
    • Punished by investors for not being as hot as they once were, Coach (COH +0.2%), Francesca' Holdings (FRAN +0.1%), and Gap (GPS -1.3%) are Magic Formula picks today.
    | 8 Comments
  • Apr. 29, 2014, 10:04 AM
    • Pac Crest has upgraded H-P (HPQ +2.1%) to Outperform, while predicting profits will recover as the company's turnaround efforts continue.
    • H-P is currently expected by the Street to post FY14 (ends in October) EPS of $3.71, and FY15 EPS of $3.84. Those figures are above FY13's $3.56, but below FY12's $4.05 and FY11's $4.88.
    • FQ2 results arrive on May 22.
    | 3 Comments
  • Apr. 22, 2014, 12:39 PM
    • Though Lexmark (LXK -11.3%) beat Q1 estimates, it's guiding for Q2 EPS of $0.85-$0.95; the midpoint is below a $0.94 consensus. Revenue is expected to fall 2%-4% Y/Y vs. a -3.8% consensus. With shares having closed yesterday near their 52-week high of $47.98, the outlook isn't going over well.
    • Supplies revenue (69% of total revenue), pressured by declining sales related to discontinued inkjet hardware, fell 1% Y/Y after growing 1% in Q4; laser supplies rose 9%.
    • Hardware revenue (19% of total) fell 8% after growing 3% in Q4. Software/other sales (12% of total) grew 13%, down from Q4's 31%, with Perceptive Software's sales rising 38% to $64M.
    • Gross margin rose 100 bps Y/Y to 41%. Opex rose 2% to $270M, and $21M was spent on buybacks.
    • Rival H-P (HPQ -0.6%) is ticking lower on an up day for equities. H-P's printing ops accounted for 20% of its Jan. quarter revenue, and 36% of its op. profit.
    | Comment!
  • Apr. 17, 2014, 12:01 PM
    • IBM soundly missed revenue estimates for yet another quarter, thanks in large part to a 23% Y/Y drop in hardware/chip sales, and also reported a $3B Y/Y drop for its services backlog. SAP missed Q1 estimates due to a mixture of forex pressure and light software license revenue.
    • Microsoft (MSFT -1.4%), whose enterprise software ops compete against both IBM (middleware, databases, developer tools) and SAP (ERP/CRM apps, databases), is trading lower. As is IBM archrival H-P (HPQ -2.6%).
    • A few enterprise cloud software vendors, some of whom compete against SAP, are also off: JIVE -3.5%. N -2%. VEEV -1.9%. MKTO -2.2%.
    | Comment!
  • Apr. 14, 2014, 7:07 PM
    • An April Barclays survey of 100 U.S. and European CIOs found 46% expecting their company's IT spending to rise in 1H14, 20% expecting it to drop, and 34% expecting no change. Those figures compare with September survey levels of 43%, 27%, and 30%.
    • Moreover, IT spending growth is seen accelerating in 2H in both the U.S. and Europe. Barclays thinks larger budgets, macro stabilization, and a need for equipment refreshes (due to high utilization rates) could be helping out.
    • At the same time, the firm cautions the spending growth is uneven: Software, networking, security, and cloud services demand is healthy, but servers, storage, and IT services remain soft. Interest in the concept of a software-defined data center is gaining traction, but big data (hyped considerably last year) is losing it for now.
    • Gartner has forecast IT spending will rise 3.2% this year to $3.77T after growing just 0.4% in 2013. Enterprise software (+6.9% to $320B) is expected to lead the way.
    • Barclays thinks its survey bodes well for H-P (HPQ), Juniper (JNPR), F5 (FFIV), Aruba (ARUN), Ingram Micro (IM), and CDW, each of which is rated Overweight.
    • Others that might take heart in the survey results: CSCO, ORCL, SAP, CA, SWI, VMW, CHKP, BRCD, ARW, AVT
    | 1 Comment
  • Apr. 10, 2014, 10:16 AM
    • Morgan Stanley has hiked its FY15/16 H-P (HPQ +2.8%) EPS estimates above consensus on expectations of a margin recovery for the company's slumping enterprise services unit.
    • The firm thinks enterprise services will post at least an 8% FY16 (ends Oct. '16) op. margin, up from just 1% in FQ1. It points out rival Computer Sciences (CSC -0.5%), which has carried out similar restructuring moves and has a slightly less favorable revenue mix, is set to have a 9% 2014 op. margin.
    • Deutsche, meanwhile, has assigned H-P a Buy rating and $40 PT as part of a broader IT hardware coverage launch. The firm likes H-P's IT hardware lineup, and sees "ample room" for margin expansion as "the company gets closer to industry levels in segments like software, services, storage and networking."
    • Deutsche thinks software op. margin could rise to 30% from a current 22%, and forecasts company-wide op. margin will rise to 9.4% in FY15 from 8.5% in FY13.
    | 1 Comment
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Company Description
Hewlett-Packard Company is a provider of products, technologies, software, solutions & services to individual consumers, small- and medium-sized businesses and large enterprises, including customers in the government, health and education sectors.