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Should HP Invest In More M&As?

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Should HP Invest In More M&As?

Hewlett-Packard Company (NYSE: HPQ) closed up less than 1 percent on Friday, just a day after the company reported its fiscal 2015 third quarter results. The results were better than expected, but some analysts still want more.

"What's amazing to me is, Hewlett-Packard still has a $50 billion market cap," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "Why aren't they out buying something? Why aren't they buying one or two 3D printing stocks? Why aren't they consolidating a couple of their old businesses?"

Udall also wonders why Hewlett-Packard isn't buying a growth company in one of the areas it wants to emphasize, such as security.

"There's plenty of stuff getting beaten up out there," said Udall. "This is my single-biggest beef with large-cap US technology companies. That would include HP, Microsoft, Cisco, Oracle -- the old guard. They have a lot of stock currency."

Udall thinks Hewlett-Packard should acquire one or two security companies, "especially if they've been beaten up." Qualys Inc (NASDAQ: QLYS), for example, is down more than 20 percent year-to-date.

He also believes that Microsoft Corporation (NASDAQ: MSFT) should acquire Twitter Inc (NYSE: TWTR) and/or Splunk Inc (NASDAQ: SPLK).

"What you typically see is, these kinds of companies never want to go buy stuff that's getting creamed in the market," said Udall. "They're like momentum buyers. They tend to wait until everything looks good and strong and prices are high and then they pay a premium on the high prices. They typically don't pay a premium against a big sell-off."

Aside from security companies, Udall thinks Hewlett-Packard should pick up 3D Systems Corporation (NYSE: DDD) or Stratasys, Ltd. (NASDAQ: SSYS).

"They are developing 3D printing solutions, which will probably end up being pretty good," he said. "But why not consolidate the industry? 3D Systems was a $100 stock. It's $12 today! They could pay a 70 percent premium, pay $2 billion and acquire the company. Stratasys was a $130 stock at $27 today -- same thing! They could pay a 70 percent premium and buy it for about $2.5 billion."

Related Link: Hewlett-Packard's Glasses-Free 3D Tech is a Star Wars Fan's Dream Come True

'Dead Industry'?

Global Equities Research analyst Trip Chowdhry does not think Hewlett-Packard should invest any money in a 3D printing company.

"I think 3D, by itself, is a dead industry," Chowdhry told Benzinga. "There was a lot of propaganda and irrational exuberance in the potential of 3D printing that doesn't exist."

Chowdhry said he is glad that Hewlett-Packard has not "become so foolish" by acquiring a 3D printing company.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Latest Ratings for DDD

DateFirmActionFromTo
Oct 2020BerenbergInitiates Coverage OnBuy
May 2020CFRAMaintainsHold
Mar 2020B. Riley FBRDowngradesNeutralSell

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