Yesterday, we noted in our post on the buyout of Dell by its CEO Michael Dell and Sliver Lake, a technology investment company, that it wouldn't be long before others tried to make hay out of Dell's problems. This morning we see that, in record time, one of the first companies to do so was HP.
HP on Dell
But there is no reason why HP shouldn't be looking to pick up some of Dell customers as Dell struggles to get to grips with privatization and what will almost certainly be a new business regime at the world’s 3rd largest PC maker.
No sooner had it been announced that Dell had inked the US$ 24.4 billion deal than HP issued the following statement, which we cite in full here:
"Dell has a very tough road ahead.The company faces an extended period of uncertainty and transition that will not be good for its customers.
With a significant debt load, Dell’s ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb. We believe Dell’s customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity.”
As the adage goes — 'keep your friends close, and your enemies closer'. Not that there was ever any love lost between the two companies, but they are both struggling against the same market forces blown up by the rise of the smartphone, tablet and mobile computing in general, and a concerted market strategy might have emerged to counter this, as Microsoft appears to been suggesting as the reason for its US$ 2 billion ‘loan’ towards the Dell deal.
HP Break-up Rumors
The irony of HP taking such a position will probably not be lost on those who are watching HP and who have been looking at the growing rumors of a HP break-up in the future.
The latest rumor comes from Quartz, the online business news magazine, which citing inside, but unidentified sources suggests that a meeting of the board of HP has already taken place.
According to the report, the meeting discussed breaking up the company and selling pieces off to obtain maximum returns for the shareholders. It also notes that the board meeting discussed keeping the company whole. But it is the former rather than the latter scenario that has excited the web with a flurry of speculative articles suggesting the imminent break-up of HP.
We have already pointed out before that, certainly at the moment, this is extremely unlikely. Meg Whitman has said that they may consider selling off business units that don't fit into her recovery plan, but that is a long way away from breaking up the company.
And HP has again denied unofficially any such plan in response to these recent rumors. The interesting thing about all this is that we have already seen similar kinds of rumors before around HP and they have all resulted in the same thing — a considerable rise in stock price.
Last month, for example, following rumors that HP had found a buyer for Autonomy, HP stock price rose by 4.1% even if it fell back again to stabilize slightly about its previous levels despite the fact that for now it is practically certain that it won't be selling off Autonomy any time soon.
Last night, following the announcement of the Dell buyout and the rumors around HP, stocks rose 2.5% again and will probably fall back again, but to a slightly higher level than last week.
The overall effect is to inch HP's stock price and company value higher. Even if the hand of Meg Whitman can't be seen directly here, this is what she was hired to do and slowly but surely she is doing it. Whether her product strategy works or not remains to be seen.