Somebody Needs to Buy HP, Now
The public investor doesn't value it. Dell may be down but it's not broke. It still makes money. It has operations around the world and is re-focusing on cloud computing and computer services. It has growth prospects.
By taking his company private Dell can focus on those growth prospects without worrying about quarterly earnings, and without having to talk to people like me ever again. Many of our greatest companies are privately held, Forbes notes, from Cargill to Mars to Bechtel. With annual sales of $60 billion, Dell would be number three on the 2012 Forbes list.
Rival Hewlett-Packard's (HPQ) reaction to this was a big nyaah-nyaah-nyaah, telling ComputerWorld confidently it's going to steal a bunch of Dell's customers due to all this "uncertainty."
But if any company on the planet should be concerned about a private equity takeout, it's HP.
While the equity value of Apple (AAPL) and Microsoft (MSFT) is more than twice their annual sales, and that of Google (GOOG) nearly five times more, HP's equity is worth barely more than one-quarter its annual sales. That's worse than retailers Target (TGT) and Costco (COST) . It's worse than Dell.
The trouble is, HP is nothing but weak divisions.Jon Xavier of Silicon Valley Business Journal recently ticked off the company's weak sisters and found himself listing the whole company.
There is value in HP, even if it's breakup value. Like an NBA team with expiring contracts, it can dump salary in the form of losses others could write off.
The company's official turnaround strategy, from an October press release , is to focus on cloud technology, data security and something called "information optimization." Mostly it's about using software to sell hardware, which is what Oracle (ORCL) is doing. Only Oracle's database software is essential to its customers in ways HP's software simply isn't.
Speaking of Oracle, it is just one of several rivals that now have the power to buy HP, sell off the stuff that doesn't work and pocket the rest. Oracle's market cap is $167 billion, Microsoft's is almost $230 billion, IBM's (IBM) is almost $227 billion. Contrast that with HP's $33.5 billion.
If Oracle bought HP, it would instantly go from a company with $37 billion in annual sales to one with almost $160 billion in annual sales. It would have networking and data servers to add to its clusters, scaled manufacturing, real clouds, and a presence in consumer markets. It would suddenly be bigger than IBM.