HPQ: Debt Precludes a PC/Printer Spin, Says UBS; Whitman in NFL Coach Spot
UBS's Steve Milunovich today reiterates a Sell rating on shares of Hewlett-Packard ( HPQ ), writing that he's encouraged by hints in the company's 10-K filing , made last week, that it would consider selling assets , but that it's not likely to be what he's been hoping for, namely a splitting off of the personal computer and printer operations . Milunovich was referring to the single phrase "[HP] continues to evaluate the potential disposition of assets and businesses that may no [longer] help us meet our objectives," contained in the filing. That phrase helped give the stock some new life on Wednesday , when media picked up on it as a clue to possible future restructuring initiatives. CEO Meg Whitman is in the hot seat just like an NFL coach , observes Milunovich: Last “Black Monday” a number of NFL GMs and coaches were fired as their teams underperformed. HP has suffered too many changes at the top, so we think Meg Whitman has some time to execute her planned turnaround. Still, shareholders likely are as impatient as unruly football fans. Although we don’t think the turnaround will work, the stock might find a bottom in anticipation of eventual change. However, although Whitman needs time to complete various priorities, a breakup still is the best long-term thing for HP, argues Milunovich: A break up is in the long-term interest of shareholders. Bill George, Harvard professor and former CEO of Medtronic, penned an article in which he argued that HP should split as we’ve described: With 330,000 employees and $120 billion in revenue, HP has become too big to manage. It is really two businesses: a commodity personal computer and printer business and an enterprise systems, services and software business. The characteristics of these businesses are entirely different. Unfortunately, Milunovich thinks HP couldn't even manage a splitting off of PCs at this point, because it's not yet healthy enough to support its debt burden :
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