Hewlett-Packard is facing sharp criticism from one of its rivals regarding the company’s strategy for investing in research and development. In a very candid interview with The Wall Street Journal, IBM Chief Executive Samuel Palmisano claimed that HP has little choice but to spend significant sums on acquisitions because former CEO Mark Hurd “cut out all the research and development.” Mr. Palmisano also criticized HP’s Board of Directors for providing Mr. Hurd with a generous severance package saying that this was not a good use of shareholder money. Read this article for our views on whether Mr. Palmisano makes a valid point.
Hewlett-Packard’s Board of Directors has yet to name a permanent CEO to replace Mark Hurd but is set to seal the deal on the company’s second major acquisition in less than one month. According to a press release issued this morning, HP will acquire ArcSight for $43.50 in cash in a $1.5 billion deal. The transaction is expected to close by year end. Read this article for more details.
Few examples in stock market history more clearly illustrate the risks of buying into “hopes and dreams” than the technology bubble of the late 1990s and early 2000s. Companies with no earnings and nonsensical business plans eventually ceased to exist and are now long forgotten. However, most of the well known technology firms from 2000 continue to exist today and have tested business models that generate consistent profitability. However, investors are so disillusioned that valuations have plummeted. This raises the question: Are technology companies now “value stocks” that should pay large dividends? Read this article for more details.
The month of August has been eventful for shareholders of Hewlett-Packard starting with CEO Mark Hurd’s forced resignation amid charges of financial misconduct and ending with a classic takeover battle for 3Par, a small and unprofitable data storage company specializing in the hot field of cloud computing. HP and Dell are currently slugging it out for 3Par with Dell matching HP’s latest all-cash offer of $1.8 billion, of $27 per share. Both HP and Dell are flush with cash and the bidding war may continue. The current bid of $27 per share for 3Par is nearly three times the price that 3Par’s stock traded at two weeks ago prior to the start of the bidding war. Read this article for more details.
Considering the scale of recent examples of corporate malfeasance, at first glance Mark Hurd’s indiscretions pale in comparison. Mr. Hurd was forced to resign from Hewlett Packard last Friday after a sexual harassment allegation failed to reveal a violation of the company’s sexual harassment policy but brought to light other questionable patterns of behavior. Specifically, Mr. Hurd’s relationship with a marketing contractor involved $20,000 of expenses associated with travel, restaurant meals, and questions regarding whether services were actually rendered by the contractor. Read this article for an opinion regarding HP’s severance agreement for Mr. Hurd.