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Strategies & Market Trends : Speculating in Takeover Targets
ULBI 9.980-1.2%3:59 PM EDT

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To: Glenn Petersen who wrote (2761)8/19/2011 11:32:18 AM
From: richardred  Read Replies (1) of 7058
Looks like LEO APOTHEKER is the newest member of the Starburst Gang. Today it's sure leaving a sour taste to HPQ shareholders. He's starting to remind me what George Fisher did to Kodak.

Hewlett-Packard sums up worst of Corporate America Commentary: Bloated company lacks leadership, innovation, smarts By Jeff Reeves

ROCKVILLE, Md. (MarketWatch) — The market had quite an ugly day on Thursday. But for a brief moment, Hewlett-Packard swam dramatically against the down-current on news it was considering a massive $10 billion buyout of software firm Autonomy, among a host of other reports swirling around the stock that day. HP stock gapped up about 6% at lunch time yesterday even as the Dow Jones bounced along about 400 points below the index’s reading at the opening bell.

Of course, the gains were fleeting and HP (NYSE:HPQ) finished the day down, along with nearly every other stock on Wall Street. Some investors were fooled for about an hour — and then the profits evaporated. Read our story on Friday‘s stock market movements.

Thursday’s performance is a fitting example of how short-lived any rays of hope are for HP these days amid the frenetic pace of company developments. The 10-figure buyouts. The claims that it is rethinking its role in the tech sector. The blatant flaunting of its massive cash stockpile at a time when companies claim to be suffering from the economic downturn.

Hewlett-Packard is everything that’s wrong with corporate America right now — stupidity, a lack of innovation, bloated operations and no leadership.

Stupidity Lots of people thought that Hewlett-Packard was batty when it bought Palm in 2010. At the time, the company didn’t bother to hedge its bets but instead engaged in the typical hyperbole of a big-name buyout. Check out this gem from the official press release on

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Hewlett-Packard cuts sales outlook Hewlett-Packard stunned the industry by cutting sales outlook, dumping its webOS operations and saying it's considering spinning off PC manufacturing as it reported quarterly results ahead of schedule. Dan Gallagher has details on The News Hub.

“Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices,” said Todd Bradley, an executive vice president in the personal systems group.

Oh yeah? Well what about the news Thursday that Hewlett-Packard will be abandoning any effort to capitalize on the mobile market by killing its tablet computer and mobile phone business based on webOS – the very gadgets Palm was supposed to inspire?

Only can a bloated corporation like HP make a $1.2 billion purchase during a recession and then give up on that buy a mere 16 months later.

Read how a GOP president would avoid recession on

The icing on the cake: Just this past February, HP made a big to-do about its plan to duke it out with the iPad — and just months after smack-talking, had to eat its words.

Lack of innovation Unfortunately, the $1.2 billion for Palm is just part of a spending spree fueled by HP executives with too much money and a desire to spend it without thinking.

In November 2009, the tech giant paid $2.7 billion for routing and digital security stock 3com. Then in September 2010, Hewlett-Packard engaged in a spitting match with Dell (NASDAQ:DELL) to buy out data storage and cloud computing stock 3Par — with HP paying $2.35 billion for its “winning” bid of $33 a share, over 83% higher than Dell’s opening bid of $18 a share.

Now we have news that the company is buying British software stock Autonomy (LSS:UK:AU) (OTN:AUTNF) (OTN:AUTNY) for $10 billion.

We’ve already had HP essentially admit the Palm move was a disaster. But even if we take a huge leap of faith and assume those other moves pay off, HP is building its future profits on the work of other companies and the efficiencies it can gain from streamlining operations to maximize margins and profits.

That’s fine if you’re a CEO or executive at the top of the food chain. Not so good if you’re part of the 25,000 workers trimmed in the wake of the 2008 acquisition of Electronic Data Systems for $13.6 billion. Or the 9,000 HP employees let go in 2010, or the thousands of folks who will undoubtedly be terminated as this tech giant “consolidates” operations in the years ahead due to these bloated buyout deals.

Read about the top 5 ETFs to buy now on

God forbid Hewlett-Packard should grow through innovation and critical thinking — or at the very least, to simply do what it has always done in a compelling way that will connect with more consumers and businesses. That would require some leadership and some true entrepreneurial spirit.

Bloated and getting fatter So in under two years, the company will likely burn $16 billion on four multi-billion buyouts that cover consumer tech, data storage, networking and enterprise/search software.

Undoubtedly, board members will argue that Hewlett-Packard is trying to diversify its operations so it can offer a wide array of services with synergy, winning both an economy of scale and the ability to easily package related products to get the most bang for their buck.

Of course, those folks should probably stop justifying their behavior and listen to companies like Cisco (NASDAQ:CSCO) . I’ll let CEO John Chambers do the talking:

“When you’re growing, let’s just say for purposes of discussion, in the high teens, you can afford to bet in many areas,” the Cisco exec said in April. “When you’re growing in a lower number — just for purposes of discussion, let’s cut that number in half — you can’t afford many of the areas. So we’re going to cut back on the number of priorities, get very focused on our top five [and] grow it through.”

There’s nothing new about good corporations getting a little too fat and unfocused. Heck, even Wall Street darling Apple (NASDAQ:AAPL) had its moment of corporate disarray. The iconic tech company was on the verge irrelevancy in 1997 before it called Steve Jobs back to the corner office. But as you can watch on YouTube if you search for the 1997 MacWorld clip, Steve Jobs makes a rather simple but prescient statement: “Apple’s not as relevant as it used to be everywhere, but in some incredibly important market segments, it’s extraordinarily relevant.”

In short, Steve Jobs and Howard Schultz didn’t reinvent the wheel. They simply knocked off the other doo-dads and flashy lights that had stopped the wheel from rolling smoothly.

HP hasn’t gotten that memo. Instead, it continues to spend increasing amounts of money for the next big thing — not realizing that too many big things will actually cave the roof in.

No leadership Perhaps most damning is that HP is an asylum run by the inmates, with varying degrees of delusion and plain craziness across some of its biggest moves lately year.

The company announced a $10 billion buyback in 2010, and executed over $4 billion of that plan. Just weeks ago it announced plans to buy back another $10 billion in shares. Yes, HP had $12 billion in cash as of this spring… but where is that money coming from in light of this $10 billion buyout deal unveiled this week? Was the buyback plan just a PR move to cheer up investors, or did the company honestly have no idea it would be burning $10 billion in this recent buyout of Autonomy? Read why HP’s repurchase is one of 5 bogus buybacks at big-name stocks on

In reporting earnings Thursday, Hewlett-Packard lowered its revenue forecast for the year, which hurt the stock. But more disturbing was the sideshow that surrounded these announcements. After rumors surfaced that HP was considering spinning off its PC business, the company confirmed talks with a surprise press release — that just so happened to drop the bomb about killing its its webOS mobile business on top of disclosing earnings about a half hour before its scheduled time to report numbers.

Who the heck is running this operation?

That question looms large, as the company continues to struggle to find its way. Carly Fiorina was forced to resign as chief executive officer and chairwoman in 2005 following “differences [with the board of directors] over how to execute HP’s strategy,” according to a corporate press release. Funny to think they had one, given the last few years.

Then in 2010, CEO Mark Hurd resigned amid controversy over sexual harassment claims and shenanigans over expenses. It’s one failure in leadership after another.

This leadership vacuum is perhaps the most disturbing things for shareholders. Because until HP gets some adult supervision, it will continue to make stupid and lazy business moves — and share prices will continue to suffer.
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