The CNNMoney.com August 29, 2010, article discusses the bidding war between Hewlett-Packard (HPQ) and Dell (DELL) for the little-known 3PAR (PAR).
» Read more: CNN Money Article: 3PAR bidding war: Are Dell and HP crazy?
Posts Tagged ‘PAR’
CNN Money Article: 3PAR bidding war: Are Dell and HP crazy?
August 29th, 2010
Hewlett-Packard (HPQ) Fair Value Estimate
August 27th, 2010When BP (BP) was in the heat of the Gulf explosion crisis, we presented our free cash flow sensitivity analysis (here) and forecast, showing the stock was fairly valued in the mid- to perhaps upper- $30s range. When the stock reached $40, we reported that investors were “getting giddy” over its prospects (see article here)—that were not warranted given its free cash flows, and increased cost of equity related to the uncertainly of its free cash flows and updated capital structure.
Here we do the same now for Hewlett-Packard (HPQ): which results in a fair valuation of $47.27.
Comment on HPQ
August 26th, 2010While the bidding for 3PAR (PAR) is reminiscent of two drunks at a horse auction, whereby the winner is the loser, the 2 point decline in HPQ (HPQ) shares seems excessive. By taking $4.6 billion off its market value relative to the $1.6 billion (at last count) acquisition, investors appear to be ignoring the enterprise’s 8% free cash flow yield. The executives at HPQ have done an admirable job wringing costs out of the firm, from supply chain to benefits.
HPQ, Business Acquisitions, and Share Buybacks
August 25th, 2010The fact that HPQ (HPQ) and DELL (DELL) have recently grossly underperformed the technology index is tacit recognition their pursuit of 3PAR (PAR) is a value destroying acquisition. Investor response is therefore appropriate in light of the minimum $1.6 billion cash outflow, in return for an asset that is barely free cash flow positive, and brings to light the seriousness in which business acquisitions must be analyzed. In fact, I estimate, 3PAR would need to add over $ 40 million in free cash flow for the deal to make sense, a scenario not foreseen for at least 3 years.
Business Acquisitions
August 23rd, 2010HPQ, 3PAR DEAL
August 23rd, 2010A quick reading of 3PAR’s (PAR) financial statements reveals the $1.6+ billion deal is not value-adding for HPQ shareholders.
