{"id":1707,"date":"2010-08-26T10:20:27","date_gmt":"2010-08-26T14:20:27","guid":{"rendered":"http:\/\/www.credittrends.com\/blog\/?p=1707"},"modified":"2010-09-01T13:39:58","modified_gmt":"2010-09-01T17:39:58","slug":"comment-on-hpq","status":"publish","type":"post","link":"https:\/\/www.credittrends.com\/blog\/2010\/08\/26\/comment-on-hpq\/","title":{"rendered":"Comment on HPQ"},"content":{"rendered":"

While the bidding for 3PAR (PAR<\/a>) is reminiscent of two drunks at a horse auction, whereby the winner is the loser, the 2 point decline in HPQ (HPQ<\/a>) shares seems excessive. By taking $4.6 billion off its market value relative to the $1.6 billion\u00a0(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\u00a0wringing\u00a0costs out of the firm, from supply chain to benefits.<\/p>\n

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True, the Board of Directors is deemed subpar, given the excessive share buybacks when it should have considered value-adding opportunities, even so, the stock seems to have been punished too far.<\/p>\n

While it remains to be seen the extent any\u00a0further\u00a0bids on HPQ’s part will have, given the potential deal is already a\u00a0value-destroying consolidation, a glance at HPQ’s cash flow and credit metrics indicates the stock has\u00a0little\u00a0to fall from current levels. On the other hand, an add-on, to the already $4 billion + in\u00a0remaining\u00a0share buyback\u00a0authorization\u00a0would cause us to re-think the valuation.<\/p>\n

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