HP plummets 20%: Six downgrades; analyst says HP ‘massively overpaying’ for Autonomy

“Shares of Hewlett-Packard (HPQ) have deepened their losses in pre-market trading since last night’s drop following the company’s fiscal Q3 earnings report and a rather disappointing outlook: the stock is now down $5.51, or almost 19%, at $24,” Tiernan Ray reports for Barron’s. “Since opening, the drop has continued, with the stock now down $5.96, over 20%, at $23.55.”

“Following remarks by CEO Leo Apotheker on last night’s conference call, to the effect that HP is set to embark on a multi-quarter ‘transformation’ that may see a jettisoning of its PC business, the stock has received six downgrades that I can see, from RW Baird, UBS, Needham & Co., Sterne Agee, Deutsche Bank, and CLSA Asia-Pacific Markets,” Ray reports.

Kevin Hunt, Auriga Securities analyst, says that HP “is ‘massively overpaying’ for Autonomy. Management, ‘clearly suggested things are likely to get worse at HP before they get better, so we continue to recommend avoiding the HP ‘value trap,”” Ray reports.

Read more in the full article here.
 

Related articles:
Unable to beat Apple, HP takes on IBM with major restructuring plan – August 19, 2011
More blood on Apple iPhone’s and iPad’s touchscreens: HP discontinues webOS phones, tablets – August 18, 2011

17 Comments

  1. It is a good idea to get out of any business that you pay to pack a product (like a PC box) with stuff that everyone is putting in theirs and selling it at near cost. Any good CEO should focus on what the company can make money on. If the made horse buggies, roads, and bridges and were getting out of the buggy business, we all would understand that.

    Apple is now the next generation of mobile computing. All others need to get out while they can. HP and IBM understand this. Dell will be last to go because they are a one trick pony and PC boxes are all they know how to do. It will not end well for them.

  2. HP makes just over 5% margin on its PC business. Any sudden movement in that, such as an increase in memory or display costs, and HP’s PC business becomes a loss leader. We’re seeing the beginning of the clearing out of multiple huge PC makers here.

    HP is trying to move into another arena, and its Palm purchase simply doesn’t fit into its plans. It could probably still use webOS as the front end for its server/printer/online services, and have it run in a browser or as a separate app on iPads.

    Overpaying for Autonomy may be necessary to HP to secure what it feels it needs to make this transition. That said, the last acquisition HP made sure didn’t work out so well.

  3. The is what happens when a high stepping German takes over a high flying American company and proceeds to do a reverse Battle of Britain by massively overpaying for Euro trash.

    1. Hmm… ok… well I hope you do know that Apothekers parents were Polish Jews that had to flee from the Nazis…
      However WWII analogies are kinda boring; that war is long over and while others may have won the war, Germany has won the peace…

  4. Did anyone expect different? HP basically said it was transforming the company into something totally different from its past of consumer goods to a specialty database software company. On top of that it spent big money by buying Palm recently. And apparently it paid too much this software company it just purchased. All those lost jobs. What’s to love?

  5. HP sucks at printers too…

    OK the hardware is good but the software sucks big time. Its that old mentality… make crap and hope no one notices.

    Why improve printer software when you can just make people buy a new printer. 🙂

    Just a thought,
    en

  6. When good companies hitch their wagons to a star, they would inevitable get into trouble in the long haul. HP, Dell and IBM were innovative companies in their own right. But when they decide to get a free ride on Microsoft’s or Google’s horses, they particularly give up their birthright to be innovative; thus, they become dependent, lazy and opportunistic. Nobody can innovate if their plans are always dictated by the agenda of a higher power. Microsoft’s and Google’s models are like the concubinage or a vassalage types. It is inimical to the whole ecosystem. Sooner or later the fortunes of both masters and slaves would implode.

  7. I’ve got to say that I have far more respect for HP’s management than I did two days ago. Knowing when to cut your losses is something that most businesses suck at.

    -jcr

  8. Kevin Hunt, Auriga Securities analyst, says that HP “is ‘massively overpaying’ for Autonomy.

    The Suckers List for 2011, so far:
    1) Microsoft buys Skype for $8.6 Billion.
    2) Google buys Motorola Mobility for $12.5 Billion.
    3) HP buys Autonomy for $10.24 Billion

    Way to go!
    (0_o)

  9. …CORRECTION

    “HP sold 12,000 units in UK channels during July – 15,000 in western Europe – but this dropped to just 100 units in the first week of this month, Context data revealed.” from The Register this week.

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