Hewlett Packard (HPQ) continues to struggle to turn its business around, and a lot of analysts are starting to speculate that perhaps the company should consider breaking up.
One investor who does not appear to be in this camp is Carl Icahn. Rumors have been swirling that Icahn has been building a stake in the company, but neither side has confirmed whether or not Icahn has been getting into the stock.
HP has been a company trying to find an identity in recent years, as slowing PC and printer sales have resulted in the company’s market cap shrinking by $27.9 billion this year, and the stock down around 45% year to date.
There is no doubt that there are some troubled parts to the business, but there are also a lot of good parts too. If you look past the disastrous Autonomy Corp acquisition and the failure of the company to capitalize on its $1.2 billion Palm acquisition in 2010, there are some positives.
At this point, there is little question that the company’s units would be worth more dismembered than they are worth as a whole, with some measurements valuing the different units as much as 80% higher than the company current market cap of $28 billion.
Reasonable estimates suggest the company's PC business could fetch around $8.5 billion; its IT Services Unit could pull in around $16.5 billion; and its servers and storage business could be worth $22.1 billion. When you take into account Hewlett-Packard's printing and software business arms, which could be worth a combined $19 billion, you start to see the dilemma that the company currently faces.
It is almost impossible for struggling tech companies to turn around a single business division, much less athe wide-range of businesses Hewlett Packard has under its roof.
I do not believe the company’s board is going to make the tough decision to break up any time soon, but I think it should. You can be sure that if 2013 is anything like 2012, the pressure is going to increase and I think the board will realize the decision to break up is one that should have been made a long time ago.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors.