ProBook 6445b battery

HP: $8 Billion Charge Great For Investors?
Hewlett-Packard (HPQ) announced that it is raising its third quarter forecast. The company also said that it expects to write down $8 billion worth of its enterprise-services business and shuffling management at the top of the division. It further added that it is eliminating 27,000 jobs, mostly coming from the enterprise service division. Following the write-down, it will replace John Visentin as the head of enterprise services. The company will bring on board Mike Nefkens and Jean-Jacques to head the unit.(Dell 910 battery)
The decision to write-down implies the declining value of Electronic Data Systems. It acquired the company for $13.9 billion in 2008. Former Hewlett-Packard CEO Mark Hurd expected that the marriage of HP and Electronic Data Systems will produce one of the market's leading outsourcing providers, with the ability to complete lifecycle capabilities in healthcare, government, manufacturing, financial services and other industries. But, it failed with this campaign as rivals Wipro (WIT) and Tata Consultancy were able to handle IT outsourcing more efficiently than Electronic Data Systems. Wipro has maintained its operating margins of 17% and has returns on equity of 21%. This is despite the fact that most IT outsourcing players have low single digit margins and returns on equity.
The $8 Billion Charge: Short-Term Pain, Long-Term Gain
The recent acquisition blunders highlighted the company's lack of direction from management shuffles. Over the last three years, there were also three top management changes. This resulted in different mindsets and strategies for the company. The impact is also obvious if one would assess its historical financial performance. For the last 5 years, it has grown its revenues by 6% a year. This translates to operating margins of 7% to 8% and return on equity of 17% to 21%. For the fiscal year 2011, operating margin is at 7.6% and return on equity of 17.89%. This is at the lower end of the historical range.
In contrast, Google has successfully implemented its acquisition strategy. Google's notable acquisitions have translated to incremental cash flow for the company. Over its 14-year history as a company, it has spent $22 billion in acquisitions of more than 100 companies. The result is astounding. Revenues have grown by 29% for the last 5 years. This translated to operating margins of 31% to 35% and returns on equity of 18% to 20%. Given the strong track record of Google, I would not be surprised if these figures will be higher in the future.( ProBook 6445b battery)
Even IBM (IBM) has better prospects. It has also successfully integrated its acquisitions into the company. It has grown its revenues by 3% a year. This translated to operating margins of 17% to 19% and returns on equity of 65% to 73%. Since IBM has making traction in the enterprise market, I expect figures to remain steady through the next fiscal years.
It seems that the market is clearly discounting its ability to turn around its operations. I believe that one of the key catalysts is breaking up the company. Based on the recent UBS report, a potential break-up of its consumer and business divisions would make perfect sense. I believe this would complement Whitman's plan to focus on its three key areas. It will also convince the market that there is a solid plan to turn things around. I expect that this won't happen unless there is an activist like Carl Icahn or Bill Ackman to push Whitman. For now, the market will continue to wait on the sidelines.
tag:HP 6530b battery, ProBook 6545b battery,batteriesblog