Hewlett-Packard Co. (NYSE: HPQ)  has just joined the list of stocks which hit new 52-week lows, but it gets worse.  These were actually the lowest levels seen since late in 2006.  This was intra-day, and it was under the lows from October 10 during the peak of stock sales in the market meltdown.

It is no secret that PC companies and consumer electronics companies are running into issues.  The goodnews is that many consumers need to buy new PC’s whether they want toor not.  Many systems are still with legacy operating systems or areout of date.  Laptops and mobile PC’s also need to bereplaced regardless of the economy. 

The issue is that a rapidlyslowing economy is going to drive PC buyers down into the lower-pricedunits.  When you walk into a Best Buy, Circuit City, or other technology retailer, it is amazing the computing power you can buy for under $1,000 even including a monitor and software.  This is great for consumers and great for businesses that need computing power on the cheap, but this all lends more credibility to the lower margin story.  Throw in a slower and slower growth model in Asia and take down the expectations to a crummy calendar Q4 for the Christmas season, and the issues magnify further.

IBM (NYSE: IBM) has also recently come within striking distance of its52-week lows.  It is not in the PC business any longer, but it is amajor competitor of H-P’s new EDS unit.  H-P recently announced it wouldlay off thousands of workers from the old EDS unit as it looks tostreamline those operations into a more profitable entity.  It may havemade this acquisition just in time for the big IT spending slowdown.

Things have also been rough over at arch-rival Dell Inc. (NASDAQ: DELL).  It has recently put in new 52-week lows and it appears thatit hit a new intra-day low of $12.11 today, under the prior range of$12.27 to $30.77.  Michael Dell just reaffirmed above industry growth,but the announcement of buying technology companies to remaincompetitive leaves a question of how much the company will have tospend to hold its ground.

Printing and imaging rival Lexmark International Inc. (NYSE: LXK) isstill almost 10% above its 52-week lows of $24.57.  Because of lowvaluations with a projected 2008 P/E ratio of under 8.0 and a 2009projected P/E ratio of under 10.0, it has seen two upgrades of late.Citi just raised it to a "Buy" rating this morning after a large dropafter its earnings this week.

H-P shares traded as low as $35.10 this morning.  The prior range was$35.50 to $53.48.  The good news is that this stock is back up almostat $36.00.  The bad news is that companies which hit 52-week lows oftentend to keep hitting new 52-week lows.

Jon C. Ogg
October 22, 2008

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