HP: No Pin Action, But Still Packs a Punch

As Cliff Mason noted earlier today, Cramer likes to talk about "pin action" a lot -- the effect that one company's good fortune usually has on other, related companies (parts manufacturers, for example). The key word, however, is "usually." In the disastrous market we have these days, you can't even depend on this pin action any more.

Hewlett-Packard , one of Cramer's favorites (and which his charitable trust owns) had an outstanding day by any measure on Tuesday with its fourth quarter earning preannouncement. But what happened next? NOTHING. That's the problem. "Zero pin action."

In "normal" times, if a company like HPQ performs well, you'd expect companies that make computer hardware, software and accessories to get a piece of the pie, an echo of the pin action. HPQ "is the kind of company that can generate genuine pin action. What was good for Hewlett-Packard used to be good for dozens of companies. But not this time."

Intel , which makes the chips in many HP computers, also preannounced its fourth quarter, but on a different note: "things are bad." Cisco , which uses HP hardware, has reported slowdown. Glassmaker Corning reported less demand for widescreen TVs and computer monitors. "There is simply no pin action to be had," laments Cramer. "Nothing works off this good news for Hewlett-Packard except Hewlett-Packard."

The tech sector in general looks like the overall market: dismal. And it didn't get a bump from Hewlett-Packard's preannouncement either. Cramer: "The bad news is already in from these other companies. Frankly, I find all of this really puzzling. Tech isn't a zero sum game. There should be some pin action considering how many companies HPQ buys from and sells to. But there's none."

And the question of the day: in this awful environment, how did Hewlett-Packard do so well? How did it "transcend the rest of tech?" Cramer cites three ways in which HPQ is beatig the downturn for now: "it's got great management, because it's cutting costs, and because it's taking share."

Stay away from other tech stocks, advises Cramer. "But Hewlett-Packard has proven itself." Even with its price dropping in today's market freefall, it's "a gift, as you usually don't get to buy a stock this cheap after the kind of run it had yesterday..."

Cramer is the first to admit that Hewlett-Packard doesn't meet his usual set of criteria -- it's not "recession resistant, trading at or near cash, or yielding over 4% in this market." But because it's trading at 8.4 times its earnings forecast for 2009 (while competitors are trading about 10 times next year's numbers), it's "cheap compared to the rest of tech."

Bottom line: "What's good for Hewlett-Packard may not be good for anyone else anymore, since there's no pin action here, but at least it's still good for Hewlett-Packard."

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