Why HP Stock Is Acting 'Crazy'
By: Reports that Hewlett Packard might be spinning off its PC business and buying a software company caused HP's stock to go from $29 and change to $34, but then quickly began trending down again, to $30 and change.
Gee, isn't this good news? I mean, we all know that PCs are a low-margin business. Heck, IBM got rid of their PC business and never looked back.
It is, but I think there is big concern that HP might not have anything good to say in its earnings report after the bell.
It's a pretty simple story. There's been no growth in PC sales for years. The growth at HPQ has come from Enterprise Software, where revenues have doubled from 2007 to 2010.
That's why the reported interest in acquiring Autonomy, a British business software developer, is important.
What does Autonomy do? Enterprise software. Hm.
CEO Leo Apotheker was, of course, formerly with German enterprise software giant SAP ...this is not lost on traders. This is a "software CEO showing his fangs" as one tech trader wrote to me.
By the way, don't let all these fancy words like "enterprise software" befuddle you. It's just a catchall phrase for software that businesses use: it can be everything from running a company's internal computer systems to automated billing systems, online shopping, and HR management. And everything else.
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