Hewlett-Packard Punch Up. Is it Mortal Combat for Jim Chanos and Meg Whitman $HPQ #deliveringalpha

English: Meg Whitman

Jim Chanos of Kynikos Associates is shorting Hewlett-Packard (NYSE:HPQ). He claims it is a value-trap. The big complaint he has is much of the M&A activity really disguises the lack of R&D and therefore the numbers are skewed. A common enough problem as companies who have lost their way try to buy their way out.

Usually most short sellers just keep their thoughts to themselves relying on stealth to mask their trades. Jim Chanos has gone public. Now Meg Whitman will need to respond in some fashion. Officially Meg Whitman will need to walk a tight path on Reg FD. Officially Meg Whitman will need to clear the issue as a factor affecting Hewlett-Packard. She just has to.

Watch investor and corporate communications for tells from HP.

George Gutowski writes from a caveat emptor perspective.


Dell Tries a Big Gulp Acquisition. Is Quest a Snack or Big Meal? $DELL $QSFT $HPQ $IBM

English: Dell Logo

English: Dell Logo (Photo credit: Wikipedia)

Dell (Nasdaq:DELL) tries to turn itself into a services firm like IBM (NYSE:IBM) or Hewlett-Packard (NYSE:HPQ) by acquiring Quest Software (Nasdaq:QSFT) . Winning the price war is not always the best way to create shareholder value but that’s just what they did.

No word from Dell about when the deal will be accretive so investors are just expected to hang onto their hats.

The $2.4 Billion price tag is about 20% of Dell’s cash balance. So excuse investors who want to see something come of this. One cannot but be haunted by Morningstars Take on Quest “…operates in an environment that is investment intensive and fiercely competitive, making it unlikely the firm can sustain its profitable growth in the long-term.”

Dell you need to provide a lot more colour on this one. And we don’t mean red ink.

George Gutowski writes from a caveat emptor perspective.

$Dell Curious Dividend Strategy. True Religion, Just Another Magic Trick or Incredibly Good Strategy. $IBM $HPQ

Image representing Dell as depicted in CrunchBase

Image via CrunchBase

Dell (Nasdaq:DELL) announced the birth of their dividend strategy. Something like $0.08 @ share quarterly beginning in Q3. Year end Jan 31 just like all retailers. The dividend yield comes in at around 2.7% is designed to attract a new classification of investors. Those of the yield and income persuasion are being targeted. Of course the dividend yield is based on a 52 week low.

So the question becomes is this true religion or just a magic trick from a Board of Directors desperate to appear relevant.

Companies which see themselves as dividend yield vehicles execute business models designed to produce stable predictable earnings and cash flow. This usually means being dominant in your markets, offering compelling product offerings which are relevant to customer needs and having control over your cost inputs and supply chain. Dell does not score very high in these categories.

Dell sources two-thirds of revenues from end point devices such as lap tops and desk tops. It is nowhere in tablets and hand-held devices, which as we all know is where the action resides. Also as we all know the field is dominated by huge giants who also have execution problems.

Dell does have big ambitions in the enterprise solutions business. Hewlett Packard (NYSE:HPQ) and IBM (NYSE:IBM) are already there and probably will not roll over anytime soon. So lets look at a few of the challenges Dell will encounter.

Dell market cap is $21 billion with a stock at a 52 week low. If they are successful in increasing the share valuation will the cash flow move in tandem allowing dividend increases to reward investors.

Hewlett-Packard market cap is $43 billion also near its 52 week lows and with a similar dividend yield. However its seasoned and hopefully past a lot of drama. Meg Whitman still needs to bring home the bacon but holds better cards than Michael Dell.

IBM market cap is $227 Billion and the stock is at the upper range of its 52 week pattern. The yield is 1.75%. Admittedly much lower than the others but you have to admit creating a 1.75% on $227 Billion is more impressive qualitatively.

IBM total cash clocks in around $12.3 Billion, HP cash registers around $8.3 Billion and Dell clocks in at just under $14 Billion. Dell clearly has a larger cash stash for now.

So why the conversion to dividend yield. Yes it seems to be the trend. Investor relations departments have finally figured out that the buy and hold investor is the preferred shareholder base. Buy and hold is motivated by dividends.

Dell will need to make acquisitions to meet its ambitions in enterprise solutions. Cash is always nice but most companies would prefer to use their own stock as a currency. Enterprises looking to sell to Dell will be concerned about the long-term strength of a volatile stock. Putting in the dividend stabilizes the beta. It also makes your stock comparable to others and keeps you in the game of buying others.

The problem dividend investors will have will be dilution and a radically changing business model. Will the dividend be safe and sustainable. Time will tell. But Michael Dell is playing a big, very big poker hand.

George Gutowski writes from a caveat emptor perspective.

Mark Hurd career killing letter. Why did the letter surface during a slow news cycle. $HPQ $ORCL

Mark Hurd

Image by jdlasica via Flickr

Mark Hurd’s career killing letter finally bubbled to the surface. You remember Mark Hurd, he used to be so in charge at Hewlett-Packard (NYSE:HPQ) and then found very decent work at Oracle (Nasdaq:ORCL). There is nothing new here. Investors are not going to change their mind or try to unwind trades from like six months ago.

The two sides of the battle male and female must have known its contents so there is no shock value. No one can change their statements. Parts of the career killing letter have been previously repudiated but lets run it through the cycle again.

Lets run the whole story through the cycle again.

Its sad, very sad when the media gets bored.

Its suspicious, very suspicious when secret letters are suddenly revealed.

Gold is probably cratering. No one trusts financials. Europe continues to shake, rattle and roll. Mitt Romney leads in Iowa caucuses and the US Government is hitting the debt ceiling again. But no, its the Mark Hurd thing, like again. Do you see the book deal coming.

So here is the one unifying theme to investment and finance. Sex sells. It does not create value but man it sells big time. Somehow we can’t help ourselves.

George Gutowski writes from a caveat emptor perspective.

Hewlett Packard is the old Apple. Innovation anyone $HPQ $AAPL

Hewlett-Packard 48GX Scientific Calculator Per...

Image via Wikipedia

My thesis is that Hewlett-Packard (NYSE:HPQ) is the old Apple (Nasdaq:AAPL) HP used to innovate and delight its customer base. Started life in a garage HP built stuff that enabled people. Then they just built it real good and people appreciated the durability and value.

Now…how are they delighting customers. Apple look at HP; this is what happens when you lose it. It’s not pretty.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

Meg Whitman punches Larry Ellison in the nose $HPQ $ORCL

Image representing Hewlett-Packard as depicted...

Image via CrunchBase

Meg Whitman is on the job at Hewlett-Packard (NYSE:HPQ). She is keeping the PC’s and the printers. They are all commodities which means low margins and mercurial demand from mercurial customers. Meg Whitman is not a stupid executive. So why reverse the decision to get out of a product line that may not create shareholder wealth?

Two major reasons.

Firstly the exit cost is huge. So lets avoid that OK. Jury is out on that one.

Secondly Oracle (Nasdaq:ORCL) read Larry Ellison and Mike Hurd covet Hewlett-Packard especially without the PC stuff. By keeping the PC division a take-over becomes very difficult. Read less attractive. Keeping the PC division becomes a defensive poison pill.

Meg Whitman may have lost her Senate bid but she knows a thing or two about a fist fight.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

Meg Whitman looks for validation. Follow the money $HPQ #megwhitman #ceo

Meg Whitman speaks at the Tech Museum in San J...

Image via Wikipedia

Hewlett Packard (NYSE:HPQ) has lost control of their communications. I blame the board. They have always had a problem keeping a secret. How can it be anyone other than Meg Whitman. Could you imagine the poor sap that and the PR problems? So maybe it was Meg Whitman that leaked it. She is political you know.

Meg Whitman is not a minimum wage employee. She did not spend that much money on politics. So she will be looking for validation. That means creating shareholder wealth quickly. So watch for stock options and performance fees.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.