The response to Hewlett Packard’s (HPQ) announcement late yesterday that it chose former SAP Ag (SAP) CEO Leo Apothekar to be HP’s new CEO has received hopeful if somewhat confused responses from the Street today.
How could it be otherwise: Someone no one expected, taking over for a celebrated tech exec, Mark Hurd.
No one seems quite sure what his priorities might be — software? hardware? acquisitions?
Mark Moskowitz, JP Morgan: While investors won’t necessarily scrutinize the “visionary” nature of Apothekar, they’re likely to question his operating history at SAP. “Mr. Apothekar spent 20 years at SAP, until his unexpected departure as CEO earlier this year, as the software giant had struggled with choppy operating performance, customer complaints, and employee morale,” notes Moskowitz, though it’s too early to say he’ll make a mess at HP. New board member�Ray Lane, also appointed yesterday, brings another software “toolset” to the company. The two together could help the company better identify what investments to make to be a one-stop shop for supplying IT. Moskowitz reiterated an “Overweight” rating and $40.82 price target.
Abhey Lamba, International Strategy & Investment Group: Apothekar brings a fresh perspective. Apothekar was the CEO for less than two years at SAP, points out Lamba, so perhaps not entirely to blame for problems at SAP. “With Leo�s background in application software, it remains to be seen if the company broadens its focus to other areas,” writes Lamba. “In our view, the company will need to move aggressively into other areas such as security and enabling technologies for cloud computing over time whereas application software will likely be the last area HP enters.”
“In our view, the stock’s multiple could remain under pressure in the near term until the new management articulates its future course of action.” Lamba reiterated a “Buy” rating but lowered the firm’s price target to $54 from $60.
Lou Miscioscia, Collins Stewart: Apothekar has strong skills, but not particularly in servers, consumer, small business, PCs, or “hardware in general,” writes Miscioscia, and “his appointment will not clear up the uncertainty around the company�s leadership in the near term as he is somewhat of an unknown and will have to prove himself.” The consolidation in software in the last decade leaves fewer M&A targets observes, Miscioscia, and for HP to do a truly “transformative” acquisition, it would likely have to spend more than the $2.35 billion it spent on 3Par or the $1.5 billion it spent on ArcSight. MIscioscia maintains a “Buy” rating on HP and a $55 price target.
Kevin Hunt, Hapoalim Securities: “Apothekar faces significant challenges in matching the results achieved under Mark Hurd over the past 5 years.” Does this mean HP is becoming a software company? Well, Apothekar only led one deal while at SAP, so it’s not clear if he’s the man to do a truly major software acquisition. While HP stock is cheap, Hunt feels the company’s an acquisition story with less transparent growth prospects, so he maintains a “Hold” rating.
Curtis Shauger, Caris & Co.: Apothekar is likely to “aggressively deploy HP’s capital,” writes Shauger (well, heck, didn’t they do that with Palm and 3Par?), with a focus on software assets. That could be good for software vendors such as Informatica (INFA), less so for “on-demand” software vendors, which are “too far up the stack” to move HP server units. (And we know Apothekar’s time at SAP was not a happy one for the company’s on-demand software offerings.)
Brian Marshall, Gleacher & Co.: Apothekar and Lane will strengthen the company’s Achilles heel, as software is only 3% of total revenue. On the down side, Apothekar “was not on the investment community’s short list of candidates and orchestrated SAP’s erroneous decision to raise maintenance rates in 2008 (poorly received by its customers.) Marshall reiterated his “Buy” rating on HP stock and price target of $53.
Tom Smith, Standard & Poor’s: “We believe the emphasis on software could help HPQ as big strides were made recently in expanding hardware and services via acquistions, so the software side would be a logical segment for an offensive.” Smith reiterated a “Buy” rating on HP stock.
HP stock today is down $1.68, or 4%, at $40.39.
No comments:
Post a Comment