The mighty Hewlett-Packard Company (NYSE:HPQ) was founded in 1939 by Bill Hewlett and Dave Packard. Working from a home garage, the two engineers managed to pioneer the art of technological innovation. For many decades, if you stumbled upon some great device, be it a printer or an IT device, most chances are that it belonged to HP. But today, the company is merely a shadow of its former self. In the past decade, HP has been constantly losing in the fight over technological superiority in all segments.
Why HP won’t survive
I strongly believe that HP won’t be around for long. It will be forced to close shop sooner rather than later due to these two strong catalysts.
Catalyst #1: Deteriorating sales across the board
Let’s see how things stack up for the rest of its business.
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The table above shows Hewlett-Packard Company (NYSE:HPQ)’s net revenue growth by segment over various time periods. No matter how you slice it, the results are horrible. Almost every segment is losing ground, over nearly every time period. Just to get a feel for the numbers, let’s compare HP’s results to those of Microsoft Corporation (NASDAQ:MSFT) and International Business Machines Corp. (NYSE:IBM). In the past year, Mr. Softy reported an impressive 23% increase in its Windows division, an 8% increase in its business division, and a whopping 56% increase in its entertainment division. IBM reported a 7% increase in revenue from its business analytic division, a minor 4% decrease in Services revenue and a whopping 70% increase in cloud revenue.
Catalyst #2: Lousy acquisitions
Hewlett-Packard Company (NYSE:HPQ) is a horrible serial acquirer. It buys just about anything that moves…and it likes to pay top dollar for it. In November 2012, a year after paying $11 billion for a software company called Autonomy, HP’s management announced that it had overpaid by about $9 billion… and that’s not the only example. HP bought Palm in 2010 for $2 billion, and EDS in 2008 for $13 billion. After the dust had settled and the excitement waned… Hewlett-Packard Company (NYSE:HPQ) was forced to write off $1 billion and $8 billion on these two recent acquisitions, respectively.
True, even the best companies sometimes make acquisition mistakes. International Business Machines Corp. (NYSE:IBM), for instance, took a massive write-off of $8.8 billion on restructuring charges back in July 1993. A year ago, Microsoft Corporation (NASDAQ:MSFT) reported taking a $6.2 billion non-cash charge to account for its disappointing 2007 acquisition of Internet advertising firm aQuantive. But keep in mind that Microsoft and IBM are six times the size of HP… and these write-offs were one time blips. With HP, write-offs aren’t the exception to the rule – they are the rule.
These massive write-offs indicate that HP’s management doesn’t have the first clue on how to price target companies. It’s down-right embarrassing. I believe it’s only a matter of time before some huge write off happens resulting in a total wipe-out of the company’s equity.
This Fool looks ahead
Hewlett-Packard Company (NYSE:HPQ) hasn’t proven itself. It isn’t the technological innovator that it used to be, and it has been losing sales in all segments. If you add to that the company’s terrible acquisition track record – you’ve got yourself a ticking time bomb. I recommend you stay away from it.
The article The Ultimate Demise of Hewlett-Packard originally appeared on Fool.com and is written by Shmulik Karpf.
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