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Settlement "Good News" For HP

cnbc.com
Friday, 8 Dec 2006 | 9:52 AM ET

Computer services and equipment maker Hewlett-Packard's $14.5 million settlement payment for a boardroom spying scandal is actually a good thing, because it resolves the distracting issue, a UBS Investment Research analyst wrote Friday.

Analyst Benjamin A. Reitzes in a client note left his "Buy" rating and $51 target price unchanged.

"With this announcement, we believe the distractions are largely behind HP and investors can focus on solid fundamentals," the analyst wrote.

HP is likely to focus on long-term operating margin goals of more than 9%, along with plans for spending excess cash at a Tuesday analyst conference, wrote Reitzes.

The company on Thursday said it will pay the sum to settle a civil claim accusing HP of unfairly "pretexting," or impersonating someone else, to obtain phone records in a quest to determine the source of boardroom leaks to the news media. The company also agreed to several corporate governance reforms, such as the appointment of an independent director to watch HP's compliance with privacy guidelines.

The widely publicized scandal led to the ouster and criminal charges against top managers, including former chairwoman Patricia Dunn. Most investors remained unconcerned throughout the brouhaha, however, with shares up 39 percent from the beginning of the year to Thursday's close.

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