Hewlett-Packard’s value has plunged to less than the US$31 billion it spent during a five-year takeover binge, the strongest evidence yet that investors would be better served by disassembling the maker of consumer laptops, printers and corporate servers.
Deals for Autonomy, Electronic Data Systems, Palm and others built on the US$17.6 billion purchase of Compaq Computer a decade ago, when Hewlett-Packard doubled down on personal computers. With the company failing to capitalise on a boom in demand for smartphones, tablets and cloud computing, fiscal 2012 sales fell, and analysts project declines for at least three more years, according to data compiled by Bloomberg. In the latest setback, Hewlett-Packard said it overpaid for Autonomy because of fraud, boosting last year’s deal-related writedowns to US$18 billion.
“All of this points to a company that’s dysfunctional,” Brian White, a New York-based analyst for Topeka Capital Markets Inc., said in a telephone interview. “This whole mishap with Autonomy should be a wake-up call to do something. I think it’s time,” he said. “How much more pain can investors take before you understand that something needs to be done?”
The US$27.2 billion company, valued at more than US$100 billion as recently as 2011, could boost a stock price languishing near a 10-year low under US$14 to more than US$20 by separating into two companies focused on consumers and business clients, UBS said.
By jettisoning PCs and printers, Hewlett-Packard can reinvest that cash into the enterprise unit to enhance its software used for data centres, according to Topeka Capital.
Michael Thacker, a spokesman for Hewlett-Packard, said the company remains committed to its current corporate structure.
“HP has some of the most valuable franchises in the technology industry,” he said. “There are many advantages in one organisation, including branding, go-to-market, supply chain, procurement scale, effective leverage of functional costs and collaborative R&D efforts. HP is committed to keeping our businesses and assets together. Our customers and partners tell us that’s what they want.”