Analyzing Hewlett-Packard (HPQ)

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By Douglas A. McIntyre Published
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By Yaser Anwar, CSC, of Equity Investment Ideas

  • Mark Hurd emphasized that the cost-cutting measures are not finished and that there is much more that the company can do and plans to do in order to become more efficient. Management reiterated their 07 guidance, which was revenue of approximately $97 billion.
  • In addition, the company provided guidance for its 08. My expectations were that the company would provide revenue guidance of approximately 5-6% and operating margin guidance of between 9.0% and 9.5%. This is exactly what the company reported for its 08 guidance.
  • Management said that it has more work to in the cost-cutting arena and that it is not over yet. Mark Hurd highlighted total TAM of $1 trillion and reiterated the focus on continuous cost evaluation and reduction especially in the support functions such as data centers and real estate.
  • HPQ’s Imaging and Printing Systems contributed 29% of total revenues in 06, it continues to yield the bulk of operating profits, 49% of total operating profits in 06, which are largely dependant on the growth of product-related supplies.
  • IPG raised its operating margin guidance from 13-15% to 14-15% mainly due to expected higher supplies mix (given share gain) and stable pricing environment. HP indicated that it is not in favor of initiating a price aggression, which should benefit the printing industry in general and Lexmark in particular.
  • Management has seen growing demand for cool servers. Management indicated that customers are now increasingly focusing on power and cooling costs. HP highlighted that power and cooling costs are about 40% of TCO of data center. Data center power density is up to 10x in past 10 years and energy costs keep rising.
  • A derivative play of this is RACK, as the server news is music to RACK’s ears.
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    Photo of Douglas A. McIntyre
    About the Author Douglas A. McIntyre →

    Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

    McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

    His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

    A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

    TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

    McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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