Wall Street’s psycho-analysis of Hewlett-Packard’s latest board room shuffle has begun.<\/p>\n
The stepping-down of Hewlett-Packard Co Chairman Ray Lane and appointment of activist investor Ralph Whitworth as his interim replacement has raised hopes for a more “shareholder friendly” board at the flailing PC maker.<\/p>\n
But investors aren’t buying it just yet, and HP shares fell more than 2 percent in morning trading on Friday.<\/p>\n
Wells Fargo analyst Maynard Um said the shakeup at HP, which follows a series of missteps including the messy acquisition of UK software firm Autonomy, could result in longer-term “shareholder friendly” actions “potentially from a capital allocation perspective.”<\/p>\n
But he said that while he now had more comfort about HP’s ability to fix its foundation, the company needed new products and initiatives to offset a general downturn in the personal computer market. And any changes are likely to take time to formulate and materialize, Um said.<\/p>\n
Apart from a new chairman or chairwoman, investors are waiting to see the final composition of the board. Two directors of the No.1 PC maker also stepped down on Thursday.<\/p>\n
“The appointment of Ralph Whitworth to the chairman role, albeit temporarily, points a more fiscally conservative and shareholder friendly board as the debt burden ebbs,” Credit Suisse analysts said in a research note.<\/p>\n
Analysts held fire on their ratings and price targets on the stock, which has risen 90 percent since it hit a 10-year low in November when HP said it would write down $9 billion in assets related to the Autonomy deal. The S&P 500 index has risen 12 percent in the same period.<\/p>\n
Lane, who remains a director, joins the list of prominent casualties of the $11 billion Autonomy deal, for which the company has been criticized for failing to conduct proper due diligence.<\/p>\n
But HP’s board and executive leadership has been in tumult since the departure in 2010 of former CEO Mark Hurd over sexual harassment allegations — which Hurd has denied — and Leo Apotheker’s brief stint at the helm, during which the company made several operational blunders.<\/p>\n
Whitworth, an HP director who runs activist hedge fund Relational Investors LLC, had told shareholders at the annual meeting in March to prepare for an “evolution” of the board.<\/p>\n
HP’s stock was changing hands at $21.98 in early afternoon trading on the New York Stock Exchange, well below its intrinsic value of $39.51, according to Thomson Reuters StarMine data.<\/p>\n
The model measures a stock’s current value when considering analysts’ growth estimates for five years, and then modeling the typical growth trajectory over a longer period of time.<\/p>\n
Netflix Inc and Best Buy Co Inc are the only S&P 500 component stocks that have outperformed HP’s 56 percent rise so far this year.<\/p>\n
According to StarMine, HP has a forward price-earnings ratio of 6.3, well below the median of 9.4 for the technology sector.<\/p>\n
However, in the past year, HP’s shares have fallen 4 percent, while the S&P index has risen 11.5 percent.<\/p>\n
RBC Capital Markets analysts pointed to HP’s “unraveling” fundamentals in maintaining their “sector-perform” rating, but said Whitworth’s appointment was a positive step in corporate governance.<\/p>\n
“Going forward, HP will have to face headwinds in PCs and printing that are more secular and less macro in nature,” the analysts said.<\/p>\n
“Furthermore, HP’s impaired balance sheet will make it tougher for HP to invest in other avenues of growth.”<\/p>\n
Hewlett Packard plunges to nine-year low<\/strong><\/a><\/p>\n Hewlett Packard layoffs to total 29,000<\/strong><\/a><\/p>\n