The Scary Story For Hewlett Packard Shareholders In One Chart

Tyler Durden's picture




 

Earlier today Hewlett Packard stunned investors by announcing that its had effectively bungled a massive acquisition, that of Autonomy plc, despite extensive prior warnings about the accounting practices of the UK firm (for which it appears Deloitte will now have to take the blame), by paying over $10 billion for a transaction that is now clear will provide zero income statement benefit. The one problem, however, is that HP incurred a massive debt load to fund EBITDA and Cash Flow which will never materialize. The result: a capital structure that is now appropriate of a B1/B+ rated company, i.e., one whose debt needs would be serviced by a firm like Jefcadia, and therefore whose time to default in years can be counted on the fingers of one hand. The chart below explains it all: why shareholders should just get out while they can, and also explains why despite, or rather due to, endless central bank mingling, cash flows still, oddly enough, matter. Oh, and those hoping the HPQ dividend continues uninterrupted in perpetuity, hope again.

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Tue, 11/20/2012 - 11:51 | 2998809 Nothing To See Here
Nothing To See Here's picture

If I was CEO of HP, I would simply raise the company's political contributions by a 5 or 10% increase. Bailout guaranteed, problem solved.

Tue, 11/20/2012 - 11:52 | 2998810 GubbermintWorker
GubbermintWorker's picture

HPQ down almost 12% today....OUCH!

 

Tue, 11/20/2012 - 11:53 | 2998815 SmoothCoolSmoke
SmoothCoolSmoke's picture

Meg Whitman spent $150 million..and could not beat JERRY BROWN.  Yeah, she's a real horse to bet on.

Tue, 11/20/2012 - 11:54 | 2998822 ariele25
ariele25's picture

the 10 year bond issued in september is still yielding 3.8%... crazy central bank manipulated market

Tue, 11/20/2012 - 11:59 | 2998828 Nobody For President
Nobody For President's picture

This is the HPQ time to BTFD, right?

http://finance.yahoo.com/q/bc?s=HPQ&t=5d&l=on&z=l&q=l&c=

 

Just getting ready for the fiscal cliff...

Tue, 11/20/2012 - 12:03 | 2998842 bankonthebust
bankonthebust's picture

I thought more debt was good? Isn't that why Amuuuurica is #1?

Tue, 11/20/2012 - 12:14 | 2998888 tbone654
tbone654's picture

When I was at HP our group did "ZERO" business in one particular quarter.  No new deals at all...  Corporate accounts (then the top 52 customers in the world) had "NO" new services business.  Yet, at the staff meeting the boss told everyone revenue for the quarter was up about 10%.  Couldn't believe it...

Now I believe it?  I see how it's done...  I should have been thinking of the Federal Reserve...

Tue, 11/20/2012 - 12:22 | 2998932 Gimp
Gimp's picture

Larry is waiting in the wings to buy this clustrpluck once it reaches $5.

Think SUN....

Tue, 11/20/2012 - 12:59 | 2999107 Hober Mallow
Hober Mallow's picture

What is strange is that it only has lost 2.5B of market cap. The hole is close to 9B.

Does this mean that the market had already priced the goodwill of Autonomy with 6.5B discount?

Or is it just market stupidity?

Tue, 11/20/2012 - 14:40 | 2999409 Big Ben
Big Ben's picture

Never trust the Brits. Never trust an accountant that you didn't hire. In fact, never trust any accountant.

Every time you buy a stock, you are trusting the accounting firm that the directors of that firm chose.

This is massive incompetence on the part of HPQ's directors. But let's just watch to see whether they are replaced.

Tue, 11/20/2012 - 15:56 | 2999580 Muppet
Muppet's picture

Thats gonna leave a mark...   possibly -$345M QTD for "Dodge & Cox Stock Fund" holding 65M shares HPQ as of 9/30 per their website.        (HPQ 17.04 to 11.70 x 64.467M shares)

Tue, 11/20/2012 - 18:18 | 3000127 biggbear77
biggbear77's picture

hey knuckleheads. get the balance sheet right. net debt at the operating company is $5.8 billion. free cash flow should be around that this year. gross cash flow is around $10 billion and capex should be less than D&A. one should not count the debt of the finance arm which is secured by assets.

this is only my second post in 2+ years. the first one was when you cluelessly called all rmbs totally worthless.

i should make as much money buying hpq here as i made in rmbs after your moronic comments.

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