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HP Investors face a lonely road Ahead

0207_HP__01__630x420Now that his nemesis, Dell (DELL), going private and bowing out of the spotlight of quarterly earnings, Hewlett-Packard (HPQ) is located at the intersection of two clich├ęs: Misery loves company (but) Breaking up is hard to do.

Of course, there is no public sign of weakness. Within minutes of the announcement of offering Dell, HP released a statement saying Dell is facing “a very hard road ahead”, as a privately owned company. “Leveraged buyouts,” the company argued that “tend to abandon existing customers and innovation in the sidewalk. Now Dell customers will be eager to explore alternatives, and HP plans to make the most of that opportunity.”

Comments may have been the revenge of Michael Dell have tweeted in the summer of 2011: “If HP spins off its PC business, maybe they will call it Compaq?” When HP briefly considered jettison boxes and laptops. Both companies probably wish they would have done so long ago.

Disappearance of Dell is little consolation to Hewlett-Packard, who-comes of its own was very bad decisions, now faces a shortage of financial options. The technology company is a fraction of its original size, with its share price collapsed after 65 percent since former CEO Mark Hurd was ousted in August 2010.

“In our opinion, the evaluation board is a possible breakup of fiduciary duty standard with the stock up nearly 50 percent in the last year,” wrote analyst Brian Marshall of ISI Group said in a Feb. 5 note admitted, “any break until at least 1-2 years away.”

“Now they are expiating their sins,” said Dave Novosel Give Credit research firm. It notes that while HP has more than $ 11 million in cash, which is overshadowed by lightening their debt load of $ 28 billion. What’s more, he says, the company continues to pay the tab of $ 18 billion in stock repurchases poorly planned since 2010. (Compare these amounts to present value of HP market of U.S. $ 32 billion). “There is so much debt, are strategically confused, and the cash flow needed to grow,” said Novosel. “I find it hard to believe that they could go private.”

Ay, Wall Street, which has never been accused of seeing half-empty glasses, pins an average target of HP that is 20 percent below its current share price of $ 16.

HP may, at least in theory, be a first destination unlock value for investors-resistant group of agitators, David Einhorn, after all, is taking on Apple (AAPL), multiples rivals HP size Totes almost $ 140 million in cash. But HP only has so many support initiatives to pull levers, given a deep balance deleveraging mode, an activist and declawed on its board, and the widespread belief that the expansion of multinational goods sell better when companies packaged together.

Ask Carly Fiorina, former CEO of HP who gathered much of what the current administration is trying to rationalize. In a February 6 interview with CNBC, Fiorina used the word “synergy”, sans irony, three times in a minute.

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