Hewlett-Packard in fine financial condition despite leadership turmoil
Question: I am concerned about the leadership turmoil at Hewlett-Packard Co. affecting my stock. What is your opinion of it?
Answer: More important than the drama surrounding this computer hardware giant is its expansion into database and business application software.
Hewlett-Packard is in fine financial condition, with plenty of cash and manageable debt. But to adapt to changing times, the firm intends to concentrate on four areas, with so-called enterprise software joining printers, personal computers and technology services. The company also hired a chief executive with strong software industry experience. Under him is a team with considerable management depth.
On the hardware side, HP ranks No. 1 in PC sales — ahead of Dell Inc., Apple Inc. and Acer Inc. — but that business faces a competitive threat from a new category of devices such as Apple’s iPad. HP, however, recently released its own Slate 500 touch-screen tablet computer that runs Windows and sells for about $800.
The company this year acquired smart phone maker Palm for $1.2 billion and has agreed to buy data-storage firm 3Par Inc. The moves followed the 2008 acquisition of Electronic Data Systems Corp.
The company’s stock is down 18% this year, with much of the decline coming after Chief Executive Mark Hurd resigned under board pressure in August over allegations that he filed fraudulent expense reports to hide a relationship with a female contractor.
HP named Leo Apotheker, former CEO of German software giant SAP, to replace Hurd. The hiring was controversial because SAP and HP rival Oracle Corp. are in a high-profile legal battle over downloads of Oracle files by an SAP unit while Apotheker was at SAP. Hurd now serves as a president of Oracle.
Wall Street analyst ratings have issued 15 “strong buys” on HP’s stock, along with 12 “buys,” eight “holds” and two “underperforms.”
The company last year earned $7.66 billion on sales of $114.6 billion. Analysts estimate on average that its net income climbed 17% in the current fiscal year, which ended Oct. 31. They project profit growth of 13% in fiscal 2011.
Question: Schneider Value Fund has done terribly. Is there hope for improvement?
Answer: This volatile fund, which requires a hefty $20,000 minimum investment, is not for investors with weak stomachs.
The $95-million portfolio has earned a total return of 14% in the last 12 months. It averaged an 11% annualized decline in the last three years. Both results rank in the lowest 10% of all mid-cap value funds.
“This bold fund is either feast or famine” because it favors firms “with heavy debt and depressed earnings,” Morningstar analyst Katie Rushkewicz said.
For example, the portfolio plummeted 55% in 2008 and gained 39% in 2009.
The fund has a low expense ratio of 0.88% and does not impose a sales charge on purchases of fund shares.
Andrew Leckey answers questions only by e-mail. Write to him at yourmoney@tribune.com.
