Should You Buy HP After the HUGE News?

Hewlett Packard HPQ announced today that it will keep its personal computing division. A few months ago, former CEO Leo Apothekar decided to divest the PC division in an attempt to transform HP's business model. In a move that severely disappointed investors, HP's stock sold off strongly, declining from about $33 to $25. Since then, the stock has been unable to regain momentum, as continued failures suppressed appreciation.

Now that the current CEO, Meg Whitman, declared that the PC division should be kept, are investors excited to get back into HP? So far, HP has barely gained $0.25 in the after-hours trading session. Is there anything that investors may look forward to now that the decision has been made?

First, HP will not be losing the revenues from the PC division. Under Apothekar, HP would have had to restructure the entire organization, from staff to resources to product availability. Keeping the PC business will not only preserve the revenues that the division brought in, but also saves the immense amount of money that would have been required to restructure the company.

HP also conducted a conference call in which the CEO and the Executive Vice President of the Personal Systems Group, Todd Bradley, were present.

During the call, it appeared that Bradley and Whitman agreed with each other on all points. They were confident in their actions and were pleased with their outlook, especially given the current situation. Apart from deciding to keep the PC business, Whitman decided to pursue further strategies with WebOS. WebOS is the mobile operating system inherited when HP acquired Palm. It was also the operating system used on the HP Touchpad, a tablet computer that failed to the point where HP cut the prices from $500 to $100 and $600 to $150. Whitman also mentioned that HP may consider continuing plans in the tablet computer product line, but will at least continue to develop WebOS and make it an integral products available for all HP products.

The executives also mentioned the mass flooding in Thailand. While the situation is extremely unfortunate in a humanistic sense, it may also be somewhat detrimental to HP. Apparently, several HP suppliers are based in Thailand and there is a possibility of a disruption in the supply chain. Whitman claimed that HP should not get the short end of the deal and that it should get normal amounts of its supplies, and perhaps even more, but that is yet to be seen. The flooding does not seem to be letting up and there is a likelihood for suppliers to stop production in the short-term to protect their own assets. This may mean that HP will be forced to cut down production in the near-term, or possibly even forced to find other suppliers to maintain the supply chain.

The conference call also highlighted upgrades in the HP product line, which appears to be more focused on mobile computing. The executives mentioned that HP is also trying to spearhead the mobile revolution by appeasing to customers who are looking for various products that are easy to use and portable. This could also mean that partnerships with wireless providers like AT&T T or Verizon VZ may be in order, although that was not discussed.

Overall, the conference call sounded like Bradley and Whitman were satisfied with keeping the computing division. It was definitely considered to be a major profit center for the firm, at least in these executives' opinions. It is also good for the company to be steering in a different direction than what Leo Apothekar attempted; based on the stock's activity, it appears that investors were not particularly pleased with Apothekar's ideas or performance.

Investors have to determine if they are as optimistic as HP's current management. While management alluded to future direction, the comments were almost expected by many investors. It appears that HP is going to strive to develop and optimize its existing products to fit with an increasingly mobilized world. If investors think that is the best thing for the computing giant, HP just might be a buy.

• A significant portion of HP's revenues were derived from its personal computing division.

• HP's executives are positive about the company's position going forward.

• HP decided to stay in the mobile computing market in order to stay competitive against comparable companies.

• Many investors have been spooked by HP's direction over the last several months and are not sure if it is too late to save the company.

• HP barely gained a few pennies in the after-hours trading session, despite the seemingly good news; this may signify a lack of investor confidence.

• HP has decided to stick with WebOS and to use resources to continue its development; after the Touchpad's failure, this may not be what investors want HP to pursue.