Monday, January 05, 2009
(Cont'd from above)...

Jim (cont'd):   

Hewlett Packard is a strong company that is getting stronger as it’s competitors get weaker. It’s already the number one player in the PC business, and the printer business, and it’s blade server business… That offers computer and power advantages over none blade servers… that’s got the real momentum. Now, this company is not just about PCs, its got diverse revenue streams and a stable customer base. 40% of sales coming from large enterprises, 30% from small/medium business, another 30% from regular consumers.. I know, I know you are worried. Big, big concerns about a slowdown. Well, that is why the stock is at $36... I like this one so much, that I use it personally. And it is part of my Victor Kayem memorial investment strategy, I own it for my charitable trust, ActionAlertsPlus.com.

Now, in the PC business Hewlett Packard has a strong two tier distribution model. An international scale.. You know what they are doing with that, they are pants-ing the heck out of Dell.. Which has been shifting its channels and tweaking its supply chain, trying to move toward world retail distribution…. Something that Hewlett Packard already has. It makes it easier for Hewlett Packard to take share, or at least maintain it’s number one position. 2009 starts the same as 2008, by the way… I am talking about one company pants-ing another because I am one immature 63 year old, who is about to turn 64... As for the printing business, which has been a real downer. Still generating a ton of cash.. For Hewlett Packard. I think the strong, the lack of competition from Lexmark will let this company take share… 2009 starts a lot like 2008... When we do the real show, we will get a fake PC… Not to mention the fact that there is some room for Hurd to cut costs...

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But the real game changer here could be, the electronic data system acquisition. Which gives the combined company major opportunities for growth and cost cutting. I love this acquisition. I love it. EDS takes Hewlett Packard beyond just selling computers, printers, related services… and into outsourcing. IT Solutions… saving customers money… Plus Hurd can keep the best people and lay off the weakest at EDS. Was it a country club?… Don’t even say country club, because that means Bernie Madoff and 30% off… Anyway, at a lower cost and given more time to focus on growing the whole company. Now he has already laid off 2300 people at EDS, he just got the thing. More coming. Total of 12,300 layoffs expected for all 2009... Memo for me, we don’t use the term fire, we use the term layoff… Anyway, thanks in part to EDS, Hewlett Packard’s recurring revenue should head from 33% in total revenues.. Respectable. To 40%. Remember we like stable earnings from a tech company. And in Hewlett Packard’s case, here.. Also said to carry higher margins, of course that means more profits.

Now what is my biggest worry. My biggest worry, was that a billion plus dollars of business that EDS… an old spin off of GM.. Still does with GM, were at risk. But over the last month of the year, we got this big break that we need. First with the GM saving thing, and then the GMAC… that terrible credit business getting some money… That is going to save the business with EDS. Now, that worry is gone for now. And Hewlett Packard has become a great tech franchise with real growth… 13.5% long term growth.. Trading at levels that make no sense to me. This is trading at 8.7 times forward earnings. When these guys come on TV and say that the market is cheap, they are speaking about something like this. Cause historically it has traded about 17 times earnings. That is luda… which is short for ludicrous, for the none cognoscenti… Even if we were in a recession… if Hewlett Packard trades up to just 10 or 11 times earnings.. Which would still be ridiculously low.. You are talking about a 42 to 46 dollar stock, 15 to 26% percent upside.. Going to be a lot in 2009. I suspect you will hear about a host of new client wins, taking from everyone from IBM to EMC.. Now that Hewlett Packard has its turnkey solution with EDS. In fact, I would sell IBM if it rallies.. Because of Hewlett Packard. So you can eliminate IBM from my list of the next four best tech stocks, Dow stocks… Although I do hear that there is a possibility of some big restructuring going on there.

Here is the bottom line...

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The Bottom Line!:     I think that Hewlett Packard will become the tech name for 2009.. Not just because they are pants-ing Dell.. I believe in Mark Hurd.. I believe in the companies earnings… And more importantly Mark Hurd believes in the earnings. Which is why Hewlett Packard is one of my five favorite stocks that you are going to hear about all week… of the Dow Jones Industrial Average… Pantsed by Hewlett.

HPQ’s my first Dow all-star & a tech name I think should do well in 2009.

[verbatim recap]

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