In HP’s earnings call, M&A talk expected to be muted

Contact: Thejeswi Venkatesh

Under the stewardship of its new CEO, Meg Whitman, who took the executive seat almost a year ago, Hewlett-Packard has been cautiously quiet when it comes to M&A. The usually acquisitive firm hasn’t announced a single deal this year, and likely won’t announce a large acquisition anytime soon, since many of its previous plays are widely regarded as blunders.

Following the purchase of Autonomy Corp, the largest software acquisition in seven years, and admitting failure in some of its previous transactions, most expect that HP won’t do another big deal in the near future.

The company is still reeling from some of its prior acquisitions. HP shuttered its Palm Inc business just one year after paying $1.4bn for the company. And HP recently announced that it would take an $8bn goodwill charge on its 2008 acquisition of Electronic Data Systems. Investors expect that write-downs in goodwill may continue because the value of HP’s goodwill ($45bn) exceeds its own market cap ($38bn).

Further reinforcing analysts’ expectations that HP will stay out of M&A is the fact that the company is struggling with its own operations. HP reports its fiscal third quarter after the closing bell today. The company has already indicated that it expects a loss of $4.31-4.49 per share. Over the past six months, HP’s shares have lost one-third of their value, while the Nasdaq has gained 5%.

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