Hewlett-Packard Is a Doddering Dinosaur
Hewlett-Packard (NYSE:HPQ) once held dominion over the technology landscape like dinosaurs once ruled the earth. But a meteor strike in the form of mobile computing has made the business of sticking commoditized computer components into plastic boxes a path to extinction.
As Josh Brown at The Reformed Broker put it so well:
“Every passing month, millions of children under the age of 10 are being handed a device that is a non-Wintel PC. Do you think this generation will buy a Hewlett-Packard anything? Will they go looking for an HP machine running Windows 12 when they’re in high school? Ridiculous.”
Indeed, sales of PC dropped 5% in the fourth quarter, according to market research firm Gartner, despite it being the all-important holiday shopping season and the debut of Microsoft’s (NASDAQ:MSFT) Windows 8 operating system.
Meanwhile, a long history of disastrous acquisitions — from Palm (now shuttered) to EDS ($11 billion write-off) to Autonomy ($8.8 billion write-off amid accusations of fraud) — have wasted precious capital and only served to set HPQ back in the most important growth areas of tech, like mobile, cloud and Big Data.
No wonder shares in the Dow component are off 36% in last 52 weeks, and 70% from a 10-year high hit less than two years ago.
Dell (NASDAQ:DELL) is reportedly thinking about going private. That might be the only exit strategy for HPQ at some point. Unless it can pull an IBM (NYSE:IBM), ditching the PC business to reinvent itself as a global “solutions” company, it’s not clear how HPQ has any future.
But when you consider that this is a company that can’t get critical acquisitions right on the most basic level (like not overpaying by, oh, $9 billion), turning HPQ into something completely different probably ain’t gonna happen.
It’s tough enough to turn an ocean liner quickly, even in smooth sailing. It’s damn near impossible after it’s hit the iceberg.
As of this writing, Dan Burrows did not hold positions in any of the aforementioned securities.