H-P Breakup Is Devastating Its Tech Valuation

Discontent over Hewlett-Packard Co.’s strategic shift has left it cheaper than any technology company in the world, turning the largest computer maker into a potential takeover target.

Hewlett-Packard lost more than $10 billion in market value after announcing it will spin off its personal computer unit, buy Autonomy Corp. and scrap a five-month-old plan to put its mobile software on devices. The 20 percent plunge drove down the valuation of Palo Alto, California-based Hewlett-Packard to 5 times estimated profit, about 70 percent less than the average technology company, according to data compiled by Bloomberg.

Since Leo Apotheker became chief executive officer in November, Hewlett-Packard’s shareholders have lost out as the company fell five times as much as the competition and faced its first decline in profit in more than a decade. It may now lure buyers looking to break it up and acquire the pieces, according to Solaris Group LLC. The server unit would boost Oracle Corp.’s share fivefold and help it become the biggest maker of the hardware. Hewlett-Packard’s printer business, which is 70 percent more profitable than the company as a whole, may also attract private equity firms, Fiduciary Trust said.

“The value right now looks extremely attractive,” Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust in Boston, including Hewlett-Packard shares, said in a telephone interview. “For the right company, it probably would make sense for someone to come in and scoop it up. Someone could come and at least buy pieces of the firm.”

‘Rudderless Ship’

Hewlett-Packard “appears to be a company that’s a rudderless ship right now,” Mullaney said.

Bill Wohl, a spokesman for Hewlett-Packard, said the company doesn’t comment on rumors or speculation.

Shares of Hewlett-Packard slipped 0.5 percent to $24.34 at 10:18 a.m. today in New York.

Hewlett-Packard is exiting the PC business nine years after the acquisition of Compaq Computer Corp. vaulted it to the top of the industry. It is also backtracking on a plan to put WebOS software it gained in last year’s purchase of Palm Inc. on all of Hewlett-Packard computers, including tablets and smartphones.

With the PC business, “we are spinning it out and that should free shareholder value,” Chairman Ray Lane said in a telephone interview. Lane said that he and Apotheker are spending the week talking to investors around the world who may want to hold Hewlett-Packard stock for the longer term.

The company also agreed last week to pay a 59 percent premium to Autonomy’s previous 20-day trading average to buy the Cambridge, England-based company in the fourth most-expensive enterprise software or services deal of more than $1 billion, according to data compiled by Bloomberg.

Shareholder Value

The purchase was Hewlett-Packard’s largest since the $13 billion acquisition of Electronic Data Systems Corp. in 2008 and Apotheker’s biggest since becoming CEO.

He said on March 14 in San Francisco that he planned a “disciplined” approach to acquisitions while shopping for targets in areas including so-called cloud computing, which lets users access software and data over the Internet, as well as security and data analysis. Apotheker, 57, unveiled last week’s overhaul as he cut sales forecasts for the third time.

The former SAP AG head is pushing to expand in cloud computing and challenge Oracle and International Business Machines Corp. in more profitable products aimed at companies as consumer demand wanes and Apple Inc. lures buyers to its iPad.