Posts Tagged 'HPQ'



HPQ: You Can Suffer Permanent Vision Impairment on This Wait and See Stock

David Faber’s excellent interview with Ray Lane on CNBC is a disaster for HPQ and gives great insight into why the Board of Directors should be replaced. To paraphrase Mr. Lane, ‘I have known Leo for years,’ And then, ‘I have been looking at replacing him for 3 months.’ So despite his familiarity with Leo, after only 6 months into his tenure, forgetting about the total time in of 9 months, the BOD decides they made a mistake. And now they bring in Meg Whitman because she knows the company so well. In fact, she has been involved with HPQ for less time than Leo. Whitman did a great job at EBAY but they are a retailer whereas HPQ is a commodity company in technology. Different skill sets are required. Derek Jeter may be a great shortstop but can’t pitch so don’t put him on the mound. What is most stark about this move by HPQ’s BOD is that they should have understood that the market lacks confidence in the comapny at every level and should have taken their time in searching for a new CEO with a skill set more in tune with their needs. A wait and see story has become a don’t wait because it will be a long time before you see any improvement. And, in my view, there is absolutely no chance of ORCL paying in excess of $50 billion for a faltering business. The entire Board of Directors should be replaced and Ray Lane should be the first to go.

Slovenia Could Imperil EU Bailout; Operation Chubby Checker a/k/a Operation Twist; The Recession is here.

Little old Slovenia, that old communist country, could be the fly in the ointment. The government fell last night and elections are not yet scheduled but the party that seems to be in favor of assuming power is apparently less benevolent than the outgoing politicians. Slovenia’s Democratic Party is also much less benevolent than the US Democrats but I guess the word “Democrat” has different definitions in former communist countries than here. They believe that countries like Greece should pay the piper themselves and that it shouldn’t fall on the Slovenians to give up their hard earned cash to profligate spenders. The issue with this is that the approval of the new ESFS proposal requires unanimous approval from all 17 members . If the Democratic Party does assume power, there is no guarantee the Slovenians vote to approve the bailout making for, at least, some suspense. The markets don’t need more uncertainty.

Alpha Natural Resources noted slowing demand in Asia for coal as one reason why they cut guidance today. This is not a good sign. China was supposed to be a bastion of strength. Copper, FCX, at lows, transports getting smeistered, these are the front end of the recession. I’m short CNX and BTU. The rails, who of course benefit from coal shipments, are feeling tremendous pain. CSX had already lowered guidance as did FDX.

In 2002, Bernanke made a speech about Kennedy’s use of Operation Twist and it wasn’t so favorable (link below) Granted the speech referred to Japanese deflation issues but is nonetheless very telling. Quote is from the footnote 11.

http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm

“An episode apparently less favorable to the view that the Fed can manipulate Treasury yields was the so-called Operation Twist of the 1960s, during which an attempt was made to raise short-term yields and lower long-term yields simultaneously by selling at the short end and buying at the long end. Academic opinion on the effectiveness of Operation Twist is divided. In any case, this episode was rather small in scale, did not involve explicit announcement of target rates, and occurred when interest rates were not close to zero.”

Like Chubby Checker, the inventor of the only twist that worked, this move will be for entertainment purposes only since it will have less of an affect on the economy than Chubby’s record sales. And it will hurt the banks.

HPQ – sell it. The Board should be fired. You approve such a radical change in direction such as buying an overpriced software company and the spinning off of your PC business and then you fire the CEO. Can you think of a worse nightmare for a CEO than having the stock decline when you are hired then spike when you get fired. Whitman, a brilliant internet pioneer, is not the answer. EBAY is a retailer, HPQ is, well what is it? It’s a declining hardware business. ORCL isn’t buying HPQ. $60 billion is an awful big price tag for a “told you so” by Hurd even if it were his decision which it’s not.

Most troubling about the bank debt downgrades is the reason. It’s crazy logic. Does Moody’s see a need for the government to bail out the banks? If so, their debt won’t be worth anything so the downgrade should be to junk. If the Lehman deja vu isn’t an issue, then there shouldn’t be a downgrade.

Guess what? I’m still bearish.


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