Tag Archives: Hewlett Packard Co

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Might Former HP CEO Mark Hurd End Up Running Dell?

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By The Associated Press

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Justin Sullivan/Getty Images Blackstone Group reportedly has been courting former HP CEO Mark Hurd to run Dell should Blackstone succeed in its bid to take the ailing computer maker private.

By MICHAEL LIEDTKE

SAN FRANCISCO — Is Michael Dell‘s attempt to gain more control over his company about to turn into a financial tug-of-war?

The answer could come Friday. That’s the end of a 45-day period that Dell Inc.’s board of directors set to allow for offers that might top a Feb. 5 deal to sell the personal computer maker to CEO Michael Dell and a group of investors for $24.4 billion.

With the deadline looming, buyout specialist Blackstone Group is emerging as the most likely candidate to trump the current bid of $13.65 a share.

Blackstone is so intrigued with the prospect of owning Dell that the firm has been courting former Hewlett-Packard Co. (HPQ) CEO Mark Hurd to run Dell if it decides to mount a hostile takeover attempt, according to a person familiar with the situation. The person asked not to be identified because the discussions between Blackstone and Hurd are considered confidential.

Several other buyout scenarios tying Blackstone to Dell have been leaked to the media this week, another indication that the New York firm is mulling a bid that could scuttle the debt-laden deal that the company reached with Michael Dell and Silver Lake Partners.

Dell Inc. (DELL) says Friday’s deadline for competing offers could be extended if its board believes other suitors would benefit from more time to examine Dell’s books and hash out other details. The company, which is based in Round Rock, Texas, has promised to provide extensive details about the sales process in regulatory documents that are supposed to be filed next week.

Many investors are convinced a higher bid is in the works. That’s why Dell’s stock price has remained above $14 for the past two weeks. The shares fell 19 cents Thursday to close at $14.14. Some analysts have even predicted Dell ultimately will be sold for $15 to $16 a share.

Southeastern Asset Management, Dell’s second largest shareholder after Michael Dell, has asserted the company is worth closer to $24 a share.

For its part, the four-member board committee that negotiated the current deal maintains it’s selling Dell at a fair price, one that reflects the dimming prospects for the PC industry as more technology spending shifts to smartphones and tablet computers.

The upheaval is siphoning revenue away from both Dell, the world’s third largest PC maker, and HP, the top PC maker. Both companies are trying to adapt by making more tablets and diversifying into more profitable areas of technology, such as business software, data analytics and storage.

The rivalry between Dell and HP makes …read more
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Why a New Dell Buyout?

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By 24/7 Wall St.

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Financial firm Blackstone Group L.P. (NYSE: BX) may make a offer to take Dell Inc. (NASDAQ: DELL) private, an offer that would be higher than one from Michael Dell and Silver Lake. Such a move would be risky, given on the PC firm’s earnings and the future of its major businesses.

A new Dell owner would have several options. The most obvious would be to cut costs through significant layoffs. Or, Dell could sell some of its divisions. The first risks cutting muscle along with fat, particularly because Dell already has had rounds of layoffs. The second risks that an auction of Dell businesses will bring disappointing results.

A new Dell owner could just fire people as sales decline, particularly at its PC division. It is an ages old tactic that sometimes works, if the balance is perfect. Cut too much and a legacy business that could make money for a while, even as its shrinks, could be understaffed. Cut too little and the chance to maintain some level of operating income disappears.

Dell still makes enough money that lower expenses might preserve operating income, but that current operating level may be too low to support a large load of debt. Dell’s net income last year was $2.4 billion, down from $3.5 billion the previous year. Margins at the consumer PC division, which is about a fifth of Dell’s revenue, fell just below zero as the revenue from this operation dropped 20%. That left Dell’s sales to businesses and enterprises to make up some of the revenue. However, enterprise sales face efforts from more successful rivals like Oracle Corp. (NASDAQ: ORCL) and International Business Machines Corp. (NYSE: IBM). Even severely crippled rival Hewlett-Packard Co. (NYSE: HPQ) remains in many of these businesses. HP maybe wounded but it is not dead.

Dell’s other large business is its services division, which has been troubled for several years. Dell has tried to bolster this segment through a frenzy of M&A, the most notable being the purchases of EDS and Perot Systems. The net effects of these transactions were write-downs based on analyses that Dell had paid to much.

With problems at many Dell divisions, it is hard to understand which it could sell for much, unless it wants to jettison the only operations that make substantial money.

Private equity purchases of large public companies generally are based on the idea that a private company can be better run than a public one, even if it is saddled with debt. So little about Dell is attractive that it is impossible to see how that would work.

Filed under: 24/7 Wall St. Wire, Mergers and Buy Outs, PC Companies, Rumors Tagged: BX, DELL, featured, HPQ, IBM, ORCL

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The U.K. Looks into the HP Buyout of Autonomy

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By 24/7 Wall St.

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The never-ending battle over the Hewlett-Packard Co. (NYSE: HPQ) buyout of Autonomy continues. HP took a $5 billion write-off less than a year after the deal. It seems that the big company was duped by Autonomy’s financial claims, or so it says. Now, the United Kingdom has decided that it should weigh in. According to the BBC:

The UK‘s Serious Fraud Office (SFO) is investigating the sale of technology firm Autonomy to Hewlett Packard, according to a filing from HP.

It joins the US Department of Justice and the UK accounting regulator in questioning the firm.

A number of investors and due diligence experts believe that some fault sits with HP management and its board. The company engaged investment banks and auditors to review the numbers. Certainly, with so much money involved, it would be prudent to make a meticulous evaluation. HP clearly did not. Now it has to rely on regulators, and probably the court system, to clean up the mess.

Filed under: 24/7 Wall St. Wire, Mergers and Buy Outs

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What's Important in the Financial World (3/12/2013)

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By 24/7 Wall St.

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The U.K. Probes HP

The never-ending battle over the Hewlett-Packard Co. (NYSE: HPQ) buyout of Autonomy continues. HP took a $5 billion write-off less than a year after the deal. It seems that the big company was duped by Autonomy’s financial claims, or so it says. Now, the United Kingdom has decided that it should weigh in. According to the BBC:

The UK‘s Serious Fraud Office (SFO) is investigating the sale of technology firm Autonomy to Hewlett Packard, according to a filing from HP.

It joins the US Department of Justice and the UK accounting regulator in questioning the firm.

A number of investors and due diligence experts believe that some fault sits with HP management and its board. The company engaged investment banks and auditors to review the numbers. Certainly, with so much money involved, it would be prudent to make a meticulous evaluation. HP clearly did not. Now it has to rely on regulators, and probably the court system, to clean up the mess.

Treasury Sells GM Shares

The Treasury Department continues to dump massive numbers of shares in General Motors Co. (NYSE: GM), either because it wants to show it can get some taxpayer money back from its bailout of the largest American car maker, or its does not like the firm’s future prospects. Certainly GM‘s years of losses in Europe may be a trigger for Treasury’s concerns. In its monthly TARP Report to Congress, the Treasury Department reported:

In February, Treasury’s brokers for GM stock sales informed Treasury that they had engaged six smaller broker dealers, including minority and women owned broker dealers, assist with Treasury’s sales of its GM common stock.

In February 2013, Treasury received total net proceeds of approximately $489.9 million from the sales of GM common stock To date, Treasury has recovered approximately $ 29.8 billion of its investment in GM through repayments, sales of stock, dividends, interest, and other income

Lenovo Sniffs Around BlackBerry

Lenovo, the Chinese PC maker, is once again hinting it might like to own BlackBerry. Given the battered Canadian company’s results, it is hard to see the appeal. But Lenovo has no real spot in the smartphone market, which is a vulnerability as it ponders the shift of consumer buying activity from personal computers to handheld devices. Lenovo may believe it needs to take a long shot. According to EWeek:

Lenovo, which offers Android-based smartphones, may be in the market for the troubled device maker, according to Lenovo’s CEO. Lenovo executives, less than two months after disavowing rumors that they were interested in buying struggling smartphone maker BlackBerry, reportedly are again raising that possibility.

Lenovo CEO Yang Yuanqing told a French financial newspaper in an interview that was published March 11 that a deal for BlackBerry “could possibility make sense,” though he would first have to assess the market and BlackBerry’s standing in it.

Filed under: 24/7 Wall St. Wire, Market Open Tagged: HPQ

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Reality Check: The DJIA Highs Are Partly a Sham, Five Big Drags with Runner-Up Drags

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By 24/7 Wall St.

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The news of the Dow Jones Industrial Average hitting new highs this week is certainly good news. The problem is that the news comes with some serious caveats. We just featured that there are really only seven of the 30 DJIA component stocks that would be needed to take the DJIA up even higher to 15,000. The rest of the market could stay the same, but there are some serious DJIA laggards that have to be considered when you see that the market is back to all-time highs.

General Electric Co. (NYSE: GE) is perhaps the biggest disappointment of all DJIA stocks. After all, GE probably represents the broad economy more than any other single DJIA stock. It has business and personal finance, oil, power, energy, appliances, health care and many other aspects covering each sector of the economy. At $23.75, and with a market cap of about $245 billion, GE‘s stock is barely half of its share price from late 2007, and on the chart its stock would have to rise about 150% before taking out the 2001 highs back when valuations were silly at about 30 times earnings. GE has recovered well over 200% from its lows, but it its share price and market value are a fraction of the peak before the recession.

Bank of America Corp. (NYSE: BAC) may have been the best DJIA stock of 2012, but it is a shell of its former glory, if you count the price of the stock after the recession. In 2006 and in 2007 Bank of America was a $40 and $50 stock. Even after doubling from its lows, and even backing out a few dollars worth of dividends since then, has the stock at $11.84. It is very possible that Bank of America may not see its old highs for a generation or more, even if Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) have a large stake. Its market cap is $128 billion, and it seems hard to imagine that shares would rise 200% to 300% further in any short period without hyperinflation.

Hewlett-Packard Co. (NYSE: HPQ) cannot win for losing, and it has been losing. This is not even due to the recession, but due to a change in technology demand toward Apple Inc. (NASDAQ: AAPL) and to smartphones and mobile computing. Mismanagement was another nail in the coffin, and even Meg Whitman has warned that the turnaround might not be seen fully until 2015 or so. The good news is that shares are actually back above $20, and that is approaching a double off of the lows of 2012. The bad news is that HP was basically a $50 stock back in 2010 and early 2011, when Mark Hurd was in charge. That company has been lost ever since Hurd was canned.

Alcoa Inc. (NYSE: AA) is another huge drag on the DJIA. Its stock is around $8.50 now and only has a …read more
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Who Will Replace Tim Cook as Apple CEO?

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By 24/7 Wall St.

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There are not many companies that could have a 35% stock drop in six months where the CEO would be under tremendous pressure. That includes Apple Inc. (NASDAQ: AAPL) CEO Tim Cook. Although he was hand-picked by deceased former CEO and founder Steve Jobs, the Apple board many consider him a liability if Apple’s new products fail in the marketplace and the company misses a number of its financial forecast, and its share prices continues to fall rapidly. Apple’s board, like any other responsible one, has an obligation to pick the best person possible run the company. And Cook may have stumbled though enough tests that his ouster may be just months away.

Who would replace Cook? The list is fairly short, given Apple’s size and the complexity of its products and technology.

Apple would not turn inside the company to pick a new chief executive. Too many of Apple’s most senior management have been with the firm too long and are tainted with their association with Apple’s trouble.

Potential new CEOs for Apple:

John Chambers of Cisco Systems Inc. (NASDAQ: CSCO) is considered the dean of Silicon Valley CEOs. Chambers, who is almost 65, has captained Cisco since 1995. The firm’s revenue over that period has grown from less than $2 billion a year to nearly $50 billion. Cisco’s operations are vast, and among the most complex in the tech industry.

The dark horse for the Apple job is the chairman of arch rival Google Inc. (NASDAQ: GOOG) — Eric Schmidt. He is no longer CEO of Google, having been moved out of that job by the board and replaced by Larry Page. Google’s shares have reached an all-time high, and much of the reason for the firm’s success goes to Schmidt. But Schmidt may want a second act after being pushed upstairs at Google. If he joined Apple and turned it around, he could be considered the greatest CEO in tech history. That, by itself, could be an enticement. And Schmidt has another advantage. He is a former Apple board member.

Retired International Business Machines Corp. (NYSE: IBM) CEO Sam Palmisano led one of the world’s largest technology companies through a transformation that helped it diversity into software and services and move it further away from hardware. He ran IBM during the mammoth integration of PricewaterhouseCoopers Consulting in 2002, considered one of the signature moves in reinventing IBM.

The most risky move Apple could take is to hire former Hewlett-Packard Co. (NYSE: HPQ) CEO Mark Hurd, who was pushed out of the company and is now co-president of Oracle Corp. (NASDAQ: ORCL). Oracle founder Larry Ellison said that Hurd was one of the tech industry’s most skilled leaders and recruited him within weeks after his ouster from HP. Hurd is known as a hard-nosed operator who ran one of the most diverse tech companies in the world, and ran it well.

There is a slight chance Apple would turn to its own board. Chairman Arthur D. Levinson built biotech company Genentech. He was made CEO of that company in 1995 and is credited with making it into a …read more
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Deutsche Bank Says Buy the Enduring Eight Tech Stocks (CSCO, EMC, HPQ, IBM, INTC, MSFT, NTAP, ORCL)

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By 24/7 Wall St.

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During the bull market for technology stocks in the 1990s, investors eagerly awaited the quarterly results from the large-cap technology leaders. The personal computer was being totally integrated into the home and business environment and pricing was more competitive with each passing year. In a new research report, Deutsche Bank A.G. (NYSE: DB) says its time for investors to own the “Enduring Eight” big-cap technology leaders again.

With business fundamentals expected to improve in 2013, corporate spending is expected to follow suit. The analysts at Deutsche Bank expect an upturn in tech business spending in 2013, after a flattish 2012, as growth picks up and confidence improves. Companies have been frugal in their information and technology budgets, and their IT infrastructure has aged. Gartner forecasts around 5% annual growth in information technology (IT) spending from 2013 to 2016, led by storage and software.

One key reason cited for purchasing the large-cap tech leaders is that, in the Deutsche Bank view, large multinational companies treat the global tech giants as key operational partners and not mere vendors. The long-term and global relationships these tech leaders have with customers are part of their ability to endure the challenges of a dynamic and competitive industry – a key difference from consumer tech products. In addition, these companies are already key players in big data, cloud and mobility, the main drivers of business IT spending

These are the Deutsche Bank enduring eight tech stocks to buy:

Networking leader Cisco Systems Inc. (NASDAQ: CSCO) currently is trading near the $20 level. The Wall St. consensus estimate target for Cisco is $26.

Storage giant EMC Corp. (NYSE: EMC) makes the list. It is trading at what appears to be a support level of $23. The Thomson/First call price target is $30.

Hewlett-Packard Co. (NYSE: HPQ) is the only personal computer company to make the grade. It closed last Friday at $20.15, and the consensus target is lower at $17.50.

International Business Machines Corp. (NYSE: IBM), the leader in IT products and services worldwide, has a consensus price target of $230. The stock closed Friday at $202.91.

Semiconductor giant Intel Corp. (NASDAQ: INTC) is the only chip company to make the Deutsche Bank list. The stock closed Friday at $21.03 and has a consensus price target of $23.00.

Windows software maker Microsoft Corp. (NASDAQ: MSFT) also makes the Deutsche Bank list. The stock closed Friday at $27.95 and has a consensus target of $33.

Network storage solution leader NetApp Inc. (NASDAQ: NTAP) is trading near $33.95, which is way below the 52-week high of $46.80. The consensus price target is $40.

Application software giant Oracle Corp. (NASDAQ: ORCL) rounds out the enduring eight list. Trading close to its 52-week high at $34.63, it has a consensus price target of $38.

The analysts at Deutsche Bank point out that while growth disappointed in 2012, it should be better in 2013. Over the cycle, tech’s enduring eight have generated healthy growth, which has yet to be fully appreciated by investors. From 2006 to 2012, average …read more
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HP Gains May Boost Dell Buyout to $15 or More

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By 24/7 Wall St.

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The results of the Hewlett-Packard Co. (NYSE: HPQ) earnings report come with a very double-edged sword. If you took away all of the pressure from Apple Inc. (NASDAQ: AAPL) in the PC business and took away your knowledge that tablets and smartphones were continuing to plague PC sales, you would look at the valuation and say that Hewlett-Packard looks like the value stock of the century. After you looked at all of the problems after that you might change your mind.

What investors have to take away from the Hewlett-Packard news is one simpleton notion that is not quite so simple in reality. That $13.65 per share proposed buyout price of Dell Inc. (NASDAQ: DELL) sounds like a bottom fishing expedition by founding CEO Michael Dell.

We previously put out a maximum buyout value per share at $15.00 after the buyout rumors resurfaced this time around. If you will recall, there had been prior stories in prior years that Michael Dell was considering a buyout. Then the latest explanation showed that dozens of meetings and discussions had taken place. One investor’s argument is that Dell is worth $24 per share.

Another consideration has to be made here. It is very possible that Michael Dell will not raise his management led buyout by one penny. We threw out a billionaire mindset scenario whereby we speculated that maybe Michael Dell doesn’t really want to acquire the company. His angle may solely be to establish a floor in the price of the stock.

Hewlett-Packard shares were up around $17.90 when we covered the earnings report. At last look we have shares up 7% at $18.30 and that is the highest price going back to September of 2012. H-P is too big in any rational case to acquire on its own due to a $33 billion market cap. It is not too large to try to unlock value here and there.

Michael Dell is paying about 8-times trailing earnings. Hewlett-Packard is currently trading at under 5-times earnings. So what if Michael Dell cannot win a buyout of his PC-maker empire? He might try many ways to unlock shareholder value. We still question whether or not Mr. Dell will really raise his offer for the company higher than the $13.65 per share price that the board agreed to. Shareholders may say also vote against the deal.

Dell shares are up at $13.85 after closing at $13.82 today and the closing bell price is only 1.25% higher than the proposed buyout price.

Is a higher buyout price coming? Maybe.

Filed under: 24/7 Wall St. Wire, Mergers & Acquisitions, Mergers and Buy Outs, PC Companies, Technology, Technology Companies Tagged: AAPL, DELL, HPQ

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Using Black Swan and Antifragile Analysis for Tech Stocks (UBS, VMW, CRM, AAPL, FB, LNKD, HPQ, NTAP, FIO, IBM, EMC)

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By 24/7 Wall St.

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Nassim Taleb is well known for his work as a trader and professor, as well as the author of the book ” Black Swan.” He often concentrates his work on market volatility and the likelihood of extreme situations or occurrences that can radically move stock prices. The 9-11 attacks on the World Trade Center were a black swan event, devastating and totally unpredicted. His new book “Antifragile” focuses on things that gain from disorder. Are there tech stocks that can gain from disorder as well?

The tech analysts at UBS A.G. (NYSE: UBS) decided it would be interesting to apply some of the principles of Taleb’s book to tech stocks they cover. They point out in their report released today that Taleb advises using optionality to your advantage in finding situations with limited downside but undetermined upside. What matters is not the frequency of being right but the magnitude when you are correct. Also, to favor a barbell approach, both in specific companies that avoid the mushy middle of markets and in your portfolio by mixing low and high-risk assets.

Fragile things hate volatility and uncertainty, while the antifragile thrives on it. The UBS team believes that technology stocks, especially large caps, are inherently fragile, given that the industry structure changes every 15 years or so. They looked for companies riding emerging trends, and point to VMware Inc. (NYSE: VMW) and Salesforce.com Inc. (NYSE: CRM) as examples.

Vendors creating new product categories also scored high as antifragile. This category included names like tech giant Apple Inc. (NASDAQ: AAPL), social media leader Facebook Inc. (NASDAQ: FB) and business networking site operator LinkedIn Corp. (NYSE: LNKD).

One area that the spectrum of fragility did not favor as well was information technology (IT). The UBS analysts pointed out that computing as a service may present more risk than upside for many of the names that they cover. In their coverage universe, they consider Hewlett-Packard Co. (NYSE: HPQ) particularly fragile, given its size and share losses. They also see NetApp Inc. (NASDAQ: NTAP) as caught in the middle as it remains concerned about Fusion-io Inc.’s (NYSE: FIO) niche status. However, International Business Machines Corp. (NYSE: IBM) and EMC Corp. (NYSE: EMC) scored much better and are well-positioned large vendors.

At the end of the day, technology in always changing and evolving. Companies that look to past successes and not to future growth often can find themselves in the stock graveyard. Antifragile tech stocks might be the way to protect a portfolio from rapid technology and consumer shifts.

Filed under: 24/7 Wall St. Wire, Analyst Calls, Technology, Technology Companies, Telecom & Wireless Tagged: AAPL, CRM, EMC, FB, FIO, HPQ, IBM, LNKD, NTAP, UBS, VMW

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What If Michael Dell Doesn't Really Want to Buy Dell? This Could Be "The Dell Put!"

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By 24/7 Wall St.

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The proposed management-led buyout of Dell Inc. (NASDAQ: DELL) is far from being without controversy. When the deal was still in the rumor stage, we came up with a maximum valuation of $15.00 per share (down to $13.60) for what a buyer would pay and what the shareholders might agree to. With the buyout price currently set at $13.65, it is no shock to us that the top institutional shareholders are effectively fighting the price.

24/7 Wall St. has a different take than what the media reports have been covering. We are not really convinced that Michael Dell really wants to acquire Dell in a management-led buyout. Sure, he wants it. We just think there is a backup plan in the works that is not being reported in the mainstream media.

The size of the deal alone is massive, and repatriating the overseas capital to help pay for the deal will come at a steep price. Our take is that investors need to consider this effort as “The Dell Put!” being the worst case scenario. The best case scenario would be a higher buyout price. Either way, Michael Dell‘s effort here may have ambitions other than what the headline flow and media coverage might have you believe.

So, if Michael Dell is not really interested in taking the company private, the end result is that Mr. Dell is really trying to establish a floor price in the stock. Will that floor be $13.65? Not likely. Maybe Michael Dell thinks that the downside of the deal falling apart is that the stock will not really trade under $12.50 or $13.00 in the future.

To get to this thought, all you have to do is step into the mind of a billionaire whose fortune is largely tied to the share price of a company. That is not just any company, but the share price of a PC-maker. Now that Apple Inc. (NASDAQ: AAPL) has been waging war on Windows-based PCs and winning, and now that Hewlett-Packard Co. (NYSE: HPQ) is in a multiyear disarray, this has to be scary for Mr. Dell. Getting Microsoft Corp. (NASDAQ: MSFT) makes for yet another interesting angle. If this deal falls apart, maybe Michael Dell would still consider including Microsoft as a financial partner ahead. Think about how you would like to be the king of yesteryear’s technology trend that has been passed by.

Our opinion is that the Dell LBO may end up being a very intelligent share price hedging maneuver by Michael Dell. If he does not get to acquire the company outright, he can at least say in a press release, “This deal was deemed today as not being an attractive price for Dell’s shareholders. These shareholders can have the comfort that I have a standing offer at or close to the proposed $13.65 share price, and I am willing to resubmit this offer in the future when the mix of shareholders owns …read more
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