1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Dividend King
Dividend King
Articles (71)  | Author's Website |

Take Advantage of HP as It Maximizes the Cloud

Hewlett-Packard (NYSE:HPQ) is “tapping the cloud to boost its Managed Print Service (MPS) capabilities.” The technology giant plans to take printing to a whole new ball game. It already has a wide enterprise customer base and an impressive printing legacy. Combined with its strong networking capabilities, both customers and investors should be even more impressed with HP in the near future.

Managed Print Services are specialized services that HP offers in an effort to improve customers' printing experiences. This includes copying and scanning as well. MPS could also involve remote monitoring and managing of its customers’ printers if needed, or simply updating devices to boost their efficiency. HP has already acquired over 3,000 customers. These include impressive names such as Disney (NYSE:DIS), Merck (NYSE:MRK), and General Mills (NYSE:GIS). It also has an impressive list of banking customers.

HP’s ePrint service is proof of the impact of cloud technology on MPS. With ePrint, mobile employees can print documents from their hand-held devices including smartphones, laptops, and tablets, thanks to the cloud. The ePrint app works similarly to a GPS, informing customers of which printing locations are near them. When a customer chooses their location and hits the “print” icon on their device, HP’s secure and private cloud grabs the print job and holds it while a code is sent back to the customer’s device. The customer then enters the code onto a device at the chosen location and the document is printed. Since its introduction last April, the app has been downloaded more than one million times.

In order to manage its MPS cloud, HP uses three remote centers located in different parts of the world. It is at those three locations that HP can manage its customers' printing devices. It is that cloud along with information management and security that are HP’s main focuses right now.

HP is trying to emerge from a rather difficult period by increasing its presence in software and other high-margin areas. The company’s move toward software has shown an acceptance of the fact that there are some weaknesses in its hardware areas, especially computer sales.

HP has been surrounded by trouble in the past few years with embarrassing stock performance and poor board choices, as well as odd decisions by short-term CEO Leo Apotheker. But, things seem to be looking up for the company now that Meg Whitman is CEO. Her recent plan for reorganization promotes cost cutting and innovation promotion.

I am still waiting for HP’s MPS to make up for the company’s falling revenue. It recently announced plans to cut costs by merging its Personal Systems Group (PSG) and Imaging and Printing Group (IPG) together. But while IPG and PSG revenue fell during HP’s first quarter, the company’s service revenue increased slightly.

Taking a look at HP’s competition, it may seem brave to take a chance on the company, but I feel it will be worth any risk in the long run. Dell (DELL), selling for about $16 per share, is also making some changes, moving away from the focus of computer sales which makes up less than 20% of its revenue. Dell has also been busy making acquisitions lately, which suggests that it is gearing toward a similar model to technology giant IBM (NYSE:IBM). But I think that HP’s smaller and more focused acquisitions could be more profitable than Dell’s.

Apple’s (NASDAQ:AAPL) iCloud is a contender with HP’s ePrinting application, but I feel that HP is a better value. Trading at around $637 per share, it is silly to even compare Apple to HP, but it deserves mention if HP is going to compete in the cloud. Apple’s Documents in the Cloud allows its users to manipulate documents using an application which sends it to the iCloud and then synchronized amongst all Apple devices. There are storage issues, however, and many people take issue with its security features and annoying multifunctioning Apple IDs.

If I am going to mention an outrageously priced stock, I might as well mention Google (GOOG). At around $631 per share, it is no bargain but definitely has some value. Google Docs is attempting the same cloud storage as HP, but not without flaws. Some users say that setup is tricky and that it is not friendly with many printers. I think Google struggles when it tries to do too many things at once. Adding Google Docs to this list of things and not fixing its errors tells me that the company is simply happy that they put it out there and is not planning on doing much with it in the future.

The real competition for HP in regards to the cloud could be Microsoft (MSFT). Where do many documents begin? Microsoft Word. An efficient mobile printing solution hosted by Microsoft in their cloud could mean that HP has to set itself apart somehow. As of now, Microsoft’s Sky Drive requires the use of an Internet browser. However, integration with the Windows OS (similar to Dropbox) could be a game changer. At around $31 per share, I don’t think Microsoft is a bad buy either. But HP’s growth potential could be more substantial, thanks to its innovative goals and recent reorganization.

The thing that sets HP apart from its competition is the overall value of its MPS. Accessing printers from central locations can help businesses in terms of ordering ink and fixing printer malfunctions. Think of the value to businesses when they can spend their time making money as opposed to fixing a printer jam.

As an evolving new business frontier, I expect MPS to grow and in turn, HP to benefit from some increased revenue. I do not expect to see immediate results as there will most likely be some hiccups along the way. Regardless, if you have the stomach for it, it could be a wise investment right now at near $23 per share.

About the author:

Dividend King
I am primarily an investor interested in creating passive income streams through dividends. I focus on finding and analyzing dividend paying stocks, MLPs and REITs that are a good fit for income investors.

I practice Judaism and my faith is very important to me. I visit family in Israel once a year, but I am educated and work in the United States where I hold an MBA and a bachelor’s in English. I am a patient man, enjoy wine but am not a connoisseur, and I listen more than I speak.

Visit Dividend King's Website

Rating: 3.5/5 (11 votes)


Please leave your comment:

GuruFocus has detected 7 Warning Signs with HP Inc $HPQ.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.

Performances of the stocks mentioned by Dividend King

User Generated Screeners

daftheadersg hk best
henrikLynch inspiret Oct 17
lajor10Low EV/EBITDA
canidPE >50th percentile of INDUSTR
brucexoct 17 user defined screen
AngryQuality Growth cheap
EnjoylifeDad 1
punjanoot2007a academy+joe
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat