HP's Stock Is Getting Smashed After An Analyst Points Out Its PC Business Could Be In Trouble

Meg Whitman

Photo: AP

Hewlett Packard shares dropped to below $20 today, a new five-year low for the beleaguered company.Jefferies & Co.’s Peter Misek helped this slide along. He  lowered estimates for HP, and Dell. He predicts soft PC demand, unspectacular sales of new Windows 8 PCs, and a punch in the gut by Microsoft Surface, Microsoft’s competing pair of tablets.

Dell is trading at the bottom of its 52-week price, too, at under $12, but at least Dell has a lot of cash in the bank and a good turnaround story to tell. Dell is trying to swim away from the PC business into the more lucrative enterprise services business.

HP, on the other hand, has botched its enterprise services business. The company is in the midst of a massive layoff — it will cut 9,000 jobs this year and 27,000 through 2014 with a good chunk of them coming from HP ES, employees have told us.

On top of that HP is drowning in debt. As AllThingsD’s Arik Hesseldahl points out: “HP’s net debt — the sum of its short and long-term debt minus cash on hand — amounts to slightly less than $21.8 billion, or about 56 per cent of HP’s market capitalisation as of yesterday’s closing price.”

The sad thing about all that debt was that a good chunk of it went to pay for HP’s $10.3 billion purchase of Autonomy.  And in 2011, HP also spent a lot of that borrowed money to help fund $7.3 billion of stock buybacks.

Autonomy has so far been “disappointing” for HP, said CEO Meg Whitman, and its founder was shown the door last month.

Meanwhile, no one understands what Whitman’s big strategy for growth is. What she’s said so far is that HP will continue doing what its doing now while cutting costs and putting some of that savings into R&D.

Is it any wonder that investors are losing faith?

Don’t miss: The 7 Biggest Ways Meg Whitman Is Struggling At HP

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