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HPQ: A Tech Dinosaur Fooling Nobody

CEO Whitman might not have what it takes to fix this train wreck

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I’ve said plenty about HP’s serial acquisitions in the past, but Alphaville did a great job parsing numbers for the latest big-time move: Autonomy. You’d think the $11 billion buyout would pack some punch, but here’s what Alphaville has to say about the numbers:

“If we assume core revenue at HP’s software business has been flat since Q3 (which is a charitable assumption), Autonomy has provided an extra $134m dollars to the division in the first quarter of 2012. Year on year, that would suggest its sales were down 40 per cent.

Spin forward to the latest quarter, repeat the process and Autonomy appears to have flat-lined from Q1 with sales down 45 per cent from last year. That’s not good. At the current run rate, HP’s acquisition price was around 20 times annual revenues.

So what happened? HP puts the blame on Autonomy’s small-time execution. The Autonomites blame a clash against HP’s culture, which one particularly excitable code monkey compared to “being water-boarded.”

Not a good sign, but not really a surprise considering the previous disastrous acquisitions at HP. For more, check out the whole Alphaville article, “Autonomy: a postscript.”

Enterprise? Not Mobile?

I got a great email from a reader yesterday contrasting HP with Lenovo (PINK:LNVGY), a $9 billion tech company based in Hong Kong. It traditionally had been a PC maker, but thanks to a focus on tablets/mobile and red-hot sales in China, profit jumped 59% in this week’s earnings report and outpaced growth trends industry-wide.

To be clear, PCs still are crucial to Lenovo, and there are serious concerns about whether it can diversify into the fast-growing tablet and smartphone markets fast enough … but at least the company is trying. Investors are liking what they see so far, too, as shares of Lenovo are up 29% so far this year and 80% in the past five years.

But rather than follow this model and the industry-wide forecast that mobile is the way of the future, HP is trying to emulate the moves of IBM (NYSE:IBM) 10 years ago when it recast itself into an enterprise and corporate IT business.

I suppose that could work if it worked for IBM … but come on, enterprise tech is mighty crowded right now, and businesses aren’t exactly spending like gangbusters. It’s a big leap to assume that HP will be a leader in cloud technology, squeeze out entrenched rivals and be there in time for a rebound in corporate spending.

But I suppose any bullish call on HP is a big leap, so why not?

Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace??.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff Reeves did not own a position in any of the aforementioned securities.

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