Hewlett Packard Riding Global PC Growth
PC demand continues to rise as developing nations move up the technology curve, leading to a very favorable pricing environment.
Better things are bound to happen
All my dues surely must be paid..."
-Ready For Love (Bad Company)
Well after last week I know I am ready for some love from this market. The news that Goldman Sachs (GS) was able to get C.V. Starr & Co., Perry Capital and Eli Broad among other investors to invest $3 bln into their Global Equity Opportunities fund should calm things down for a spell. Unfortunately, I think this rocky road we have been traveling on is going to continue for a while. So instead of trying to pick bottoms in sectors such as homebuilders and financials, let's look to leadership sectors that seem to be insulated from the craziness.
Hewlett Packard (HPQ) is due to report its 3Q after the close this Thursday.
Since taking over as CEO in April 2005, Mark Hurd has seen the price of HPQ trade from $21 to current levels of $47. The move higher was interrupted only by a government investigation that began last summer and continued into the fall, which was looking into "nefarious" internal practices. The stewardship of Mark Hurd during those uncertain times only strengthened my belief in him as a top-flight CEO.
Now there seem to be tailwinds for the industry. 2Q PC shipments announced in mid-July totaled 61.1 mln units, up 12% year over year. Hewlett Packard retained its No. 1 spot with 18.2% of all PC shipments worldwide.
The global growth story is not just about infrastructure build out and oil. PC demand continues to rise as developing nations move up the technology curve, leading to a very favorable pricing environment. Just last week, Cisco Systems (CSCO) CEO John Chamber said the current global economy is the strongest he has seen in his career. This bodes well for multi-national behemoths like HPQ.
"The Street" has jumped on board of late as well. Positive mentions by UBS, BMO Capital, Goldman Sachs and most recently Bank of America has no doubt contributed to the relative strength of the share price during these turbulent times. But, I also feel this 3Q report will be strong with guidance for 2008 and 2009 shedding further light on Hewlett's future.
The overall market still concerns me so I feel no pressure to jump into anything with both feet, but HPQ is a name that plays perfectly into the global growth story that, despite the jittery credit market, is still alive and well.
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