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.