More Tiles in the HP Mosaic

I've only seen a limited sample of analyst research on HP, but frankly it's pretty mediocre, especially the financial statement models and the valuation arguments.  The equity analysts want to like the stock, for different reasons, but they seem to be struggling to come up with compelling reasons.  The equity sales people cry out the familiar mantra, "It's dirt cheap!"  So is a wooden nickel. 

I've met a few people who work with the company in a variety of functions, and without looking for anything in particular, I hear some consistent sentiments.  The prevailing opinion is that former CEO Mark Hurd "gutted" the company with no rhyme or reason, strictly driven by making short-term numbers.  He is not held in high regard.  On the other hand, CEO Meg Whitman gets high marks for communication inside the company and for taking a measured approach to tough decisions.  This, for me, is an important tile in the information mosaic about a company. 

However, I continue to be puzzled by the total absence of insider buying.  At some point, the CEO needs to say something like this, "Listen team, I've brought you all on board with me to engineer one of the biggest corporate and market turnarounds in history.  If you're with  me on this, then we all have to have skin in the game.  We can't go and peddle this story to institutional buyers if we don't have our own net worths at risk, and I don't mean through options. I mean after-tax cash. The other directors and I are on board with this, and I need each and every one of you to come join us according to your circumstances.  Come to me in confidence if you have any questions or concerns."  This could be well orchestrated and done in a compliant way fairly easily. 

The institutional ownership trends are not very encouraging.  Dodge and Cox has clearly put a big stake in the ground through several funds, and the rest of the significant owners are index funds.  Some of the other well known value players have chosen other names.  I wonder what the value houses are concerned about?

It's a limited data point, but Standard and Poor's research concludes with this paragraph:
"We apply a peer-discount target multiple of 6.0X to our calendar 2012 EPS estimate of $4.16 to arrive at our 12-month target price of $25. This is toward the low end of the seven-year historical range for HPQ, reflecting near-term pressures and our lack of confidence in the company's turnaround prospects."  They talk about being in unattractive businesses (PC's and printing) as well as price pressures in the ESSN hardware products.  Standard and Poor's sees it as a trade, not as a BUY. 

Finally, on the cloud arguments we laid out in the last post, I still believe that if CIO's are going to make big investments in big data and utility (cloud) computing, they will need help in selling the expenditure story to CEOs and support will have to come from the high concept, high science types like Dr. Mike Lynch.  Much of the money spent may be mix-and-match projects put together with small and big company offerings which work together.  The "one stop shopping" concept for these projects might be a dead letter.