Computer Giant HP Weathering the Drama
Andrew Leckey

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About Hewlett-Packard Co.

Ticker: HPQ

Exchange: NYSE

What does the company do? Makes and sells computer hardware and software

2009 Financial report:

Net sales: $114.6 billion

Net income: $7.66 billion

Q. I'm concerned about all the leadership drama at Hewlett-Packard Co. affecting my stock. What is your opinion of it?

A. More important than the drama is this computer giant's expansion into database and business application software to go along with its proven hardware business. It has a new CEO steeped in that software background.

In fine financial condition with plenty of cash and manageable debt, Hewlett-Packard also has considerable management depth. Facing fierce competition with a need to adapt to changing times, it intends to concentrate on the four key areas of enterprise software, printers, personal computers and services.

Hewlett-Packard ranks No. 1 in PC sales ahead of Dell Inc., Apple Inc. and Acer Inc., though devices such as Apple Inc.'s iPad provide strong competition.

The firm recently released its own Slate 500 touch-screen tablet computer that runs Windows and sells for about $800. It introduced webOS 2.0, an update to its Palm mobile operating software. The smart phone company Palm was purchased by Hewlett-Packard earlier this year for $1.2 billion.

Hewlett-Packard (HPQ) shares are down 15 percent this year following last year's 42 percent gain. The company's third-quarter net was up 6 percent over the year-earlier quarter.

But as you have pointed out, headlines surrounding its top executive position have overshadowed its business moves:

-- CEO Mark Hurd resigned under board pressure over fraudulent expense reports and his relationship with a female contractor who had filed a sexual harassment complaint.

-- Leo Apotheker, the former CEO of German software company SAP AG named to replace Hurd, has drawn scathing criticism from Larry Ellison of rival Oracle Corp. SAP must pay damages to Oracle for past illegal downloads of Oracle documents.

-- Hurd is now Oracle's co-president.

Consensus analyst recommendation on shares of Hewlett-Packard at their reduced price is "buy," according to Thomson Reuters, consisting of 15 "strong buys," 12 "buys," eight "holds" and two "underperforms."

Hewlett-Packard recently agreed to buy the 3Par Inc. data storage firm. On Hurd's watch, it completed its 2008 acquisition of Electronic Data Systems Corp., its largest purchase since the Compaq Computer deal in 2002. The latter controversial acquisition engineered by former CEO Carly Fiorina ultimately led to her ouster.

Earnings are expected to be up 17 percent for the 2010 fiscal year and 13 percent the following fiscal year, according to Thomson Reuters. The five-year annualized growth rate forecast is 10 percent versus 14 percent expected for the computer systems industry.

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