Wednesday, January 10, 2007

Me and HP

I am going to begin summarizing HP analyst conferences. The next conference is not until February 20th, but I've been thinking about my relationship with HP [stock symbol: HPQ].

HP used to be Hewlett-Packard after the last names of the two men who formed the company in 1939 long before I was born. The company did not incorporate until 1947, a year when its revenues approached $1 million.

I first heard of Hewlett-Packard in the mid-1970s, in college, when hand-held calculators first became popular. I have never owned one made by HP; right now I have a TI and a Casio that are put to good use. The thing about HP was that it was not a consumer-goods producer, but an engineering firm. Early on it seemed like it would miss out on the PC revolution, but of course now it is a big name in personal computers, servers, storage and related things. It spun off Agilent a few years back, a stock I briefly owned. I also owned HP from 12/09/2003 until 2/2/2004 and made a good return on it.

I am working, typing in this blog entry, on an HP Pavillion a200y that I bought several years back for some experimenting I was doing with black boxes. It is my general purpose computer now because I consider it expendable. My newer computer is from Systemax, customized, runs on an AMD dual-core 64 bit processor, and is just waiting to install Microsoft Vista. At that point the HP will be used for Linux experiments.

On my quality scale of computers I have owned, the a200y is pretty near the bottom. I won't go into its problems but they seem to be mostly related to HP using overly cheap components. The result was a ridiculously low price, and I've certainly gotten my money's worth of use out of it. But it brings up the problem faced by Dell as well as HP and other computer vendors: how much can you compete on price before you are using lousy components that ruin your reputation for quality?

But I also have a HP LaserJet 1020 which was ridiculously inexpensive to buy and has performed great. As a small, black and white laser printer I can highly recommend it. Printers and supplies for them are a big part of HP's current success.

HP stock closed today at $42.20, which makes me realize I would have been better off as a long-term investor. But seeing into the past is a lot easier than seeing into the future.

According to NASDAQ HPQ has a price-earnings (PE) ratio of 19.36, which inverts to a 5.17% return. That is very reasonable if you expect HP to chug along for the next 10 or 20 years. The dividend of $0.32 per share works out to a 0.76% return. So the hope of HP investors is clearly that they will get price-appreciation, not just the paltry dividend.

I see no reason for someone like me to buy HP stock right now, but who knows, maybe if I listen to the analyst conference I may understand it better and change my mind. Or not.

To see the list of companies that I follow, just click here.

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