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Hewlett-Packard Trades Near All-time Lows, What Is Next?

This article is more than 10 years old.

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Pressed by disappointing earnings reports from Lexmark International (NYSE:LXK) and Apple, the stock of  Hewlett-Packard’s (NYSE:HPQ) is trading below $18 today, near its all-time low of $17.81 and long way from its all-time high of $70.

Hewlett-Packard’s stock has been hurt by a number of strategic mistakes that wasted the company’s resources and talent.  In 2001, Hewlett-Packard made the first strategic mistake, the purchase of Compaq Computer that supposed to provide the company with the scale advantage in the PC market to compete effectively against Dell Computer (NASDAQ:DELL), IBM, and all sorts of emerging Asian competitors. The problem, however, is that the PC market was already saturated and ravaged by price wars, as the PC was turning into a “commodity” Besides, Compaq Computer itself didn’t have an internal innovation system, but it relied on external acquisitions to expand its product portfolio (buying up Tandem Computer, and Digital Equipment Corporation).

In April 2010, Hewlett-Packard made the second strategic mistake, the purchase of near-bankrupt Palm that supposed to help the company enter the fast growing market for mobile devices that began to replace PCs. The problem, however, was that Hewlett-Packard was a follower rather than a leader in this market, going against Apple that enjoyed the first-mover advantage in this market.

Last year, Hewlett-Packard is about to make the third mistake, announcing the acquisition of enterprise software maker Autonomy (at a hefty price of $10.3 billion), as this move will pit the company against three major competitors, Salesforce.com (NYSE:CRM), Oracle (NASDAQ:ORCL), and IBM (NYSE:IBM). Will the new CEO Meg Whitman reverse these strategic mistakes?

It is too early to say, as so far she has been focusing on managerial adjustment like cost cutting through layoffs rather than strategic initiatives, which hasn’t help the stock recover. I will stay way from the stock.

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