HP Investor ‘Exasperation’ Runs High, Bernstein Report Says

Hewlett-Packard Co. investors are exasperated with the company’s management and its shares lack an immediate reason to climb, Sanford C. Bernstein & Co. analyst Toni Sacconaghi said in a research report.

The company’s $10.3 billion agreement to acquire software company Autonomy Corp., announced on Aug. 18, and a plan to possibly spin off its personal-computer division have investors’ frustration running high, wrote Sacconaghi, who is based in New York and has an “outperform” rating on the shares.

“The overwhelming majority of large HP shareholders remain opposed to the HP/Autonomy deal,” Sacconaghi said in the report dated yesterday. “Investor exasperation with the company is the highest we have seen in 13 years following the sector.”

Chief Executive Officer Leo Apotheker is trying to jump-start growth and lift the company’s stock after cutting sales forecasts three times in less than 11 months at the helm. The same day it unveiled the Autonomy deal, viewed by some investors as too expensive, the world’s largest computer maker said it would explore options for its $41 billion PC unit.

Chairman Ray Lane said in a Sept. 1 interview that the spinoff of the personal-systems group could interest so-called value investors who want returns through dividends and share repurchases, and potentially attract investors looking for growth to Hewlett-Packard shares.

Stock Drops

Shares of Hewlett-Packard had declined 27 percent from Aug. 17, the day before the acquisition and possible spinoff were disclosed. The stock gained 23 cents, or 1 percent, to $22.93 at 4 p.m. on the New York Stock Exchange.

Investors are also frustrated with decisions by Hewlett-Packard’s board, Sacconaghi said. They view the ouster of former CEO Mark Hurd and Apotheker’s hiring as counter to their interests, Sacconaghi said. There is still a chance for a takeover bid by Oracle Corp., though the odds of a deal are low, he said.

Mylene Mangalindan, a spokeswoman for Palo Alto, California-based Hewlett-Packard, declined to comment.

“Barring a public intervention by activists or a failure for the Autonomy deal to go through, we see no short-term catalyst for the stock, even at such depressed valuation levels,” Sacconaghi said. The shares trade at about five times expected earnings per share this year. Still, long-term investors could benefit from Hewlett-Packard’s leadership in businesses including enterprise computing and printing, and Sacconaghi expects the shares to reach $37 within a year.

“HP’s stock requires patience,” he wrote.

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