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Hewlett-Packard: The Worst Company?

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November 21, 2012 – Comments (6) | RELATED TICKERS: HPQ

HP hasn't been a going concern for years; any one unfortunate enough to have been their customer quickly discerned this.

The current CEO carousel has lined the pockets of many with generous recruitment and, usually immediately, severance packages. Meg Whitman caught on quick enough that the dead horse wouldn't take much more flogging, and so she fished up a red herring. Supposedly previous management (and the Board, of which she was a member) kinda-sorta-accidentally paid $9 billion too much for an acquisition last year.

No kidding? HP would be doing just fine, but for this?

I think the hope is that when Whitman winds down the company's operations in 2013 or 2014, she can point back to this as the nail in the coffin, the straw that fractured the camel's vertebra.

Fact is, the company has been losing share, losing relevancy, losing focus on quality and execution in every single one of its divisions for years. A failure of due diligence to the tune of $9 billion of shareholder's money is egregious and almost incredible - until you put it in the context of how HP has been running the rest of its business, which has been equally terrible.

It's sort of too bad, in a way. No one remembers the HP 6945 smartphone. It did nearly everything the iPhone 1 did - even GPS! - was at market 2 years sooner - but no one at HP ever bothered to approach a US carrier about it. Emblematic of a company with a proud engineering heritage and a set of upper management that could run a gravel pit out of business.

Flee from HPQ. Take your money far away from it. Unless you want to do what I've been doing for the last two years, which is making money hand over fist writing naked puts. Even that's less profitable nowadays - seems like the market is finally catching on.

6 Comments – Post Your Own

#1) On November 21, 2012 at 3:55 PM, Mega (99.95) wrote:

It's not like buying Autonomy was a reasonable deal even with fake numbers. Fraud just means they lost an extra 10% beyond the 70% they lost the day they signed the check.

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#2) On November 21, 2012 at 6:12 PM, rd80 (98.26) wrote:

Hostess is a little worse. 

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#3) On November 21, 2012 at 6:17 PM, Valyooo (99.35) wrote:

Why would you write naked puts on a company you expect to go down in value?

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#4) On November 22, 2012 at 1:05 PM, anchak (99.83) wrote:

"write naked puts"

 

I think he meant calls

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#5) On November 28, 2012 at 1:01 AM, AdirondackFund (< 20) wrote:

This stock is a buy.  The recent earnings report wasn't terrible and these things have a way of turning around, especially come the Christmas Shopping Season.  Look for HPQ shares to rally out of the recent plunge on what was viewed as a bad earnings report.

Normally, people remember what they're writing, puts or calls.  It's sort of indelible, or should be. 

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#6) On November 29, 2012 at 12:09 PM, ikkyu2 (99.26) wrote:

Buying naked puts, not writing them.  This is why I do my option trading with a broker, who helps me not only with what kind of option to buy or write, but also advises me about short, medium and long term and pricing or mispricing of option contracts.

Companies do not have a "way of turning around."  A $9 billion writedown is not a joke or a prelude to a turnaround.  It means the company stupidly wasted $9 billion of shareholders' money.  Companies that do that die horribly.  

A few quarters after GM reported a $68 billion quarterly writedown due to an "accounting change," the company was bankrupt.  The accounting change apparently was a change from going concern to bankruptcy.

HPQ might yet turn itself around - someone could make that argument - but where is the catalyst?  What product or service line do they have that is going to show growth?  What do they offer that allows them to best their numerous competitors?

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