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.
I don’t know why you would have any interest in this stock, counters Jeff Macke. Move on!
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Trader disclosure: On May 13, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (AAPL), (AMAT), (ENER), (NOK), (TSO), (XLF); Najarian Owns (C) Calls, (MSFT) Calls, (YHOO) Calls, (AES) Calls; Macke Owns (WMT), (INTC), (DIS), (EMC), (ATVI), (MSFT), (HAS); Finerman Owns (GS); Finerman's Firm Owns (KSS), (MSFT), (TSO), (VLO), (GLNG); Finerman's Firm Owns (YHOO) Call Spreads; Finerman's Firm Owns SPX Index Puts; Finerman's Firm Owns (C) And (C) Leaps; Finerman's Firm Is Short (IYR), (IJR), (MDY), (IWM), (SPY); GE Is The Parent Company Of CNBC; NBC Universal Is The Parent Company Of CNBC