Merrill Keeps 'Buy' on Hewlett-Packard

Analyst Steven Milunovich calls the company's cash flow restatement an honest mistake

Merrill Lynch keeps buy on Hewlett-Packard (HPQ ).

H-P says misallocation of proceeds caused an error in a 10-Q that was filed after the market's close on March 12. The company misallocated proceeds from an investment disposition into the operating section instead of the investing section. As a result, H-P overstated cash flow from operations by $144 million in a Feb. 25 earnings release. The company says the real number is $647 million vs. the reported $791 million.

While Milunovich believes this is an honest mistake, the timing is bad given investors' jitters over segment accounting changes that were disclosed in a previous release. H-P has now amended in the 10-Q for the second time with the creation of a sixth segment. He is keeping his $22 target.

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