Hewlett-Packard: How a Quiet Debt Binge Left the Company With Fewer Opportunities
A Wall Street Journal article methodically worked through what’s wrong at Hewlett-Packard (HPQ), where new products and innovation are sorely needed. But the Journal’s analysis was perhaps clearest in discussing finances. Over the last decade, H-P has added debt and spent down its cash and investments. The result is a company in less of a position to take advantage of opportunities, be they acquisitions or internal investments in new products and services.
It appears that stock buybacks in the pre-Meg Whitman days siphoned off a lot of cash, and at prices that look pretty steep today.
Paying down debt, abstaining from big buybacks and building up its cash reserve won’t make H-P cutting edge again, but it will enable H-P to take advantage of opportunities as they arise. Competing against International Business Machines (IBM) and Oracle (ORCL) will get easier as H-P's finances get stronger.
Jeff Bailey is the editor of YCharts, which includes the just-released YCharts Pro Platinum for professional investors.