Former Hewlett-Packard's Two Parts Diverge in First-Day Trading
03 November 2015 - 10:10AM
Dow Jones News
On their first day of public trading, the two companies formerly
known as Hewlett-Packard Co. together gained $2.5 billion in value,
an early sign the market considers them more valuable apart than
together.
Shares of HP Inc. rose 13%, closing at $13.83. HP Enterprise
dropped nearly 2%, closing at $14.49. Both companies had been
trading as "when issued" securities for approximately two weeks
ahead of their official debut.
Most attention ahead of the split had been focused on Hewlett
Packard Enterprise, the corporate computing company led by Meg
Whitman, which aims to build faster-growing lines of business such
as next-generation data center products and security services. But
on Monday, HP Inc., the printer-and-PC company led by Dion Weisler,
dramatically outperformed its sibling.
HP Inc.'s performance was a clear expression of investor
appetite for the consistent cash flow and lower risk of the PC and
printer company, said Daniel Ives, an analyst with FBR &
Co.
Equity researchers at Credit Suisse Group AG issued an
outperform rating for HP Inc., saying it had "multiple levers" it
could pull to offset declines in the core PC and printing
markets.
Mr. Weisler said in an interview with The Wall Street Journal
last week he believed that the company could use its printing
technology to compete against other copier vendors and branch into
3-D printing. He noted that his Palo Alto, Calif., company would
also be able to channel more money into research and development
than the 3.1% of revenue benchmark that the old H-P achieved last
year.
"We generate an enormous amount of cash inside the printing and
personal systems franchises," said Mr. Weisler. "Those investments
weren't always channeled back into these businesses."
Both H-P splinters face headwinds amid slumping demand for
personal computers and the move toward cloud computing services
delivered over the Internet. But HP Enterprise faces the bigger
challenge, according to some analysts.
Credit Suisse was neutral on the stock, saying that cloud
computing posed a serious threat to corporate technology
sellers.
The market is skeptical that companies that have traditionally
sold products that run in corporate data centers will be able to
transition to the cloud, Mr. Ives said.
H-P last month shut down a five-year effort to build a public
cloud service, saying that it would focus instead on developing
computing products that run in customers' own data centers and
working with existing cloud vendors to support their offerings.
The new HP Enterprise believes that the majority of corporate
spending will continue to go toward systems made for corporate data
centers, said Bill Hilf, the company's cloud chief. It can grow its
server business by developing next-generation products for those
customers, he said.
One day of trading is hardly a conclusive basis to evaluate a
strategic bifurcation that was more than a year in the making. But
if the split proves successful over the next six to nine months, it
could persuade other business technology vendors to contemplate
their own spinoffs, Mr. Ives said.
"A lot of tech investors are watching this very carefully," he
said.
Write to Robert McMillan at Robert.Mcmillan@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 02, 2015 17:55 ET (22:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
C3 AI (NYSE:AI)
Historical Stock Chart
From Jun 2024 to Jul 2024
C3 AI (NYSE:AI)
Historical Stock Chart
From Jul 2023 to Jul 2024