Cramer has been insistent for some time now that tech stocks are where he thinks you need to be in this market. One name that he has pounded the table on consistently is Hewlett-Packard , which reported blowout numbers last month and delivered a serious upside surprise that Cramer had been calling for.
Sometimes companies will report an upside surprise by just sandbagging the Street with low-ball estimates and then beating them, but Hewlett made a legitimate five cent beat off of an expectation that the company would do 66 cents per share in earnings. How did it do it? HP’s suppliers were all involved in big price wars which lowered HP’s costs – but HP managed to keep from lowering its prices on its own goods, which is exactly how you get such an upside swing, Cramer said.
But the bottom line is HP’s success is the mark of its management. For that reason, Cramer got CEO Mark Hurd on the line to find out how he has turned “a bit of a dud” into “one of the best tech stocks out there” in just a couple of years.
Hurd said that as the landscape in the PC business has changed, HP has maintained its focus on its fundamentals, cost structure and service to its customers. The company has been strong around the world, doing more and more business outside the U.S. and in emerging markets, Hurd said.
Much of HP’s growth has come from its notebook PCs – a division lifted immensely during the current “back-to-school blowout” when college students buy computers in droves ahead of the school year. Hurd said HP is putting a lot of resources behind its PCs in an effort to differentiate itself from other PC makers. HP is also using its muscle by acquiring companies that are “the best in their markets,” Hurd said. Recently, HP bought the software company Opsware , putting itself square in the middle of the data center automation business, which Hurd said he expects HP to lead.
“I think the best days of HP are ahead of it, not behind it,” Hurd said. “I’m bullish on the position we’re in.”
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