Hewlett-Packard (HPQ) stock hit a 52-week high and touched $33.66 on April 2 that delighted investors. This appears a bit surprising considering the number of challenges that the company’s facing in the past few years, right from the declining PC market, struggling Enterprise Service and Software revenue, to the intensifying competition from Asian PC maker Lenovo.
So what triggered the stock price to hit a 52-week record high? There’s no doubt that the settlement of a $57 million lawsuit made stock prices to shoot upward, but there are more reasons to it. Want the story revealed? Stay plugged in.
Settled a Long-Drawn Lawsuit
Finally a relief for HP! The shareholder suit that was filed in 2011 has now been settled. What made them file a suit? Actually HP’s shareholders weren’t happy with the business plan portrayed by former CEO Leo Apothekar. Apothekar continuously kept reducing the sales forecast of the company since the time he joined in September 2010. However, he assured a better future laying plans to spin-off the company’s core PC business, shutting down the WebOS mobile platform, and buying the U.K-based business software maker Autonomy Corp.
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- HP 15-Year Financial Data
- The intrinsic value of HP
- Peter Lynch Chart of HP
This didn’t look like a realistic proposition given the shrinking sale forecast. And it goes without saying that majority of the directors strongly opposed the Autonomy purchase as they thought that HP was not in the position to embrace software platform. Apothekar, who was expected to navigate the tech giant out of troubled waters, failed to perform and shares plunged significantly due to lack of catalysts. Automatically, shareholders had to bear the consequences, who then chose to file the lawsuit.
HP resolved the issue with its investors and then mutually agreed to settle it by paying them an amount of $57 million. This helped HP to hold back investor confidence that was once at stake. The company is also optimistic to settle another shareholder suit that was filed in 2012, which would further cheer investors. What is the other positive development suggesting better time for the company?
Looking at 3D Printing Space
HP plans to venture in 3D (three dimensional) printing arena that has long been dominated by players like Stratasys (NASDAQ:SSYS), 3D Systems (NYSE:DDD), ExOne and Dassault Systemes. 3D printing is primarily a prototype of an object on any material base such as plastic, nylon, glass, gold, or silver. Experts are quite excited about the technology that has gained traction lately, although the foundation was laid years back.
Market research firm Canalys expects the market to generate $16.2 billion of sales by 2018, up from $2.5 billion last year. Another market research firm Gartner sees end-user spending on this technology to amplify in the coming years. The predictions are enough to lure tech companies to put their valuable money into it and Hewlett-Packard doesn’t want to miss any chance to boost its revenue.
The current HP chief Meg Whitman plans to announce the 3D printing roadmap by this June. She is confident that HP’s 3D printers will deliver good quality products faster. Quality of the product and the time taken to deliver it are the two main challenges that the industry is currently facing, and HP seems to have resolved it to an extent.
HP currently dominates around 40% of the 2D printing market. And since it has exposure in the printing business, transition into the 3D platform would be easier. And the company’s huge cash pile would allow it to spend more in R&D to make it a profitable business.
Good Quarter Performance
HP first-quarter 2014 results that beat the Street expectation gave immense joy to the company and its investors. Although revenue was a notch below the year-ago level, its declining trend of its PC segment completely reversed with a revenue growth of 4%. The PC giant continued to offer new products that eventually pushed the segment sales upward.
The quarter’s adjusted earnings grew 10% to $0.90 a share mainly due to continuous cash containment programs. HP also amassed a cash balance of $16.2 billion, up from $12.2 billion in the preceding quarter.
Is HP a Dark Horse?
It’s quite early to say anything regarding HP’s ability to turnaround it business, but one shouldn’t deny the potential of this tech behemoth. Currently, the stock’s 1-year return is more than 50% and the upward movement is expected to stay. HP’s huge cash position, ability to settle lawsuits and venture into a new technological area raises hope for a brighter future.