Rob Black's Tech Stock Report

by: Rob Black

Highlighting another installment of turnaround progress, Hewlett-Packard (NYSE:HPQ) reported its 4th consecutive upside to results/outlook and analysts see more to come given continued cost efforts (~50% more workforce cuts still on the way), focus on margin expansion (better channel practices) and efforts to accelerate growth (investments in enterprise sales force, commercial printing).

Now, analysts are raising estimates and targets. As to collateral impact, while HPQ grew printer units only 3% Year over Year given consumer weakness and focus on high-usage segments, with solid margin expansion above its targeted range, HPQ noted its intentions to accelerate unit growth in 2nd half 2006 via more promotions which is negative for Lexmark (NYSE:LXK). Further, HPQ’s improving PC margins could also continue to pressure Dell (DELL) as its cost advantage diminishes.

Hewlett-Packard plans to consolidate its global data centers in a move it expects to reduce its information technology spending by $1 billion in the coming years. H-P anticipates restructuring operations to have six larger data centers in three U.S. cities, down from its current 85 centers worldwide.

Baird upgraded Hewlett-Packard to Outperform. Price target is $40. The upgrade is based on valuation amid prospects for continued improvement in near-term results and longer-term benefits from opportunities in enterprise, digital home, and an optimized business model.

Hewlett-Packard said that strong sales of laptop computers and printer supplies along with cost-cutting helped push its quarterly profit up 51 percent. The company also said its market share in personal computers increased 1.4 percentage points.

Sun Microsystems (NASDAQ:SUNW) said that the company was working toward making its Java programming language available free as open-source software, providing further evidence that Sun's new management sees it as more of a services company than a network computer maker.

Piper Jaffray upped Autodesk (NASDAQ:ADSK) to outperform and lifted its target price to $47. The firm is saying it expects a solid first quarter based on conversations with clients and resellers.

First Albany upgraded Applied Materials (NASDAQ:AMAT) to Neutral. The firm is saying the company is doing the right things.

Kaufman Brothers initiated SanDisk (SNDK) with a Hold and $65 target. They are concerned that 2005 may have been a peak year for NAND, and that 1st quarter results were of low quality (e.g. book and channel inventory up significantly while pricing declined 24% Quarter/Quarter, hurting margins).

Roth Capital upgraded Cognos (COGN) to Buy. The upgrade reflects their view that the current entry point is compelling and that investors are more than compensated for SEC-related uncertainty.