User 49180

Hurd Plans to Herd EDS into HP

HPQ 's Gross Margin was in the 24.5% range last year. The 1/3 of revenues from PC & related returned commodity level margins. EDS had a Gross Margin of about 13.7% last year. Even with substantial EDS/HPQ cost savings, HPQ's combined margin including EDS appears headed down from the 25% level. Given the slowdown in US consumer spending expected by the Fed it seems logical to assume that the PC segment gross margins will be headed down as well as all the PC makers compete for fewer buyers.

HPQ may be moving in the right direction - but margin compression may lead to HPQ stock p/e compression. And it would seem achieving the 42%+ Gross Margin that IBM achieved last year is not on the horizon.