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Will Hewlett-Packard Move The Market?

Next week, the big earnings news will likely come from Hewlett-Packard which reports after the market closes Tuesday. Be prepared for some good news and some bad news.

First the bad news....

Soft spending by large corporations is expected to have hurt H-P in its latest quarter, as it hurt rival IBM results. IBM reported last month that all its major business units suffered declines in the first three months of 2009, a sign that companies are still hunkered down because of the financial crisis despite some encouraging signs that things are easing.

HP and IBM are in many overlapping businesses, so the results of one often suggest something about the results of the other, though some of HP's businesses, especially personal computers and printer supplies, expose it more to fluctuations in consumer spending, which is also down because of the recession.

Now the good news...

As you might remember Intel CEO, Paul Otellini told CNBC earlier in the week that PC sales have "bottomed out," -- and market research firm IDC reported that global PC shipments fell less than expected in the first quarter, and could turn around by the end of the year.

That's significant for HP because the company depends on PC sales for about a third of its overall revenue.

What should you expect?

Dinesh Moorjani, an analyst with Broadpoint AmTech, says weak spending by large corporations on computer servers and storage, and softness in printing supplies — printer ink is a profit machine for HP — will drag down sales. But cost-cutting should cushion the blow to earnings.

Analysts expect a profit of 86 cents per share and sales of $27.4 billion, according to a poll by Thomson Reuters. For the full fiscal year ending in October, analysts expect $3.71 per share in profit and $113.4 billion in sales.

It’s also worth noting one of HP's biggest challenges right now is integrating Electronic Data Systems, a technology services company it bought for $13.9 billion last year. HP is cutting 24,600 jobs, or nearly 8 percent of HP and EDS' combined work forces. Analysts say the integration appears to be ahead of schedule.

EDS is important for HP because it increases HP's challenge against IBM in technology services. That area that has held up well despite the recession because farming out tech chores can save money for the companies.

What’s the trade?

I think the stock is interesting as a valuation play, muses Guy Adami.

H-P is up 3% for the year and IBM is up 20%, adds Tim Seymour. If you think they’re in the same business you do the math.

What do you think? Tell us now!

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Trader disclosure: On May 15th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (DRYS), (RIMM), (RIG), (TSL), (F), (AAPL), (BAC), (BX), (EEM), (FXI), (TSL); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Owns (PBR), (RIG); Finerman's Firm Owns (BAC) Preferred, (WFC) Preferred; Finerman's Firm Is Short (XRT), (BAC), (WFC); Najarian Owns (CELG); Najarian Owns (AMD) Calls; Najarian Owns (BX) Calls; Najarian Owns (INTC) Calls; Najarian Owns (MOS) Call Spread; Najarian Owns (XHB) Call Spread; Najarian Owns (XLB) Call Spread; Najarian Owns (XLU) Calls