After spending $13.9 billion for Electronic Data Systems investors are asking if the acquisition will really help HP take on IBM or just slow organic growth?
Hewlett-Packard shares dropped more than 5% Wednesday and dragged down the broader stock market after some Wall Street analysts criticized its deal to buy Electronic Data Systems for $12.6 billion.
Some critics argue that HP is paying a rich premium for a slow-growing business.
Others, such as Citi Investment Research analyst Richard Gardner see the dip as a buying opportunity. In a client note he said, "While HP does face slowing industry growth, more stable component pricing and a more stable dollar going forward, we believe these factors are more than fairly reflected in consensus estimates and the share price," the analyst wrote, keeping a "Buy" rating on the stock.
The acquisition is expected to close in the second half of 2008.
How do you trade it?
I bought HP on Tuesday, explains Pete Najarian. I see HP jumping into IBM’s wheel house and I like it.
If you were looking for an opportunity to buy HP it was today, adds Guy Adami.