Is Hewlett-Packard a Solid Investment?

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With shares of Hewlett-Packard (NYSE:HPQ) trading around $28, is HPQ an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Hewlett-Packard provides products, technologies, software, solutions, and services to individual consumers, small and medium businesses, and large enterprises worldwide. The company offers commercial notebooks and desktops, consumer notebooks, desktops, software, and services for the commercial and consumer markets. The services segment provides consulting, outsourcing, and technology services to infrastructure, applications, and business process domains. The diverse technological products and services offered by Hewlett-Packard make it a leading provider that sees increased demand through global expansion.

Hewlett-Packard has released documentation proving that the British software company Autonomy, which HP acquired for $11 billion back in 2011, committed fraud in advance of the acquisition, according to a report from the Wall Street Journal. HP has accused Autonomy of overstating its revenue and other financial information, but this documentation is the first proof HP has shown to back up its claims. According to a filing with a UK regulator seen by the Journal, an internal audit of Autonomy’s financials performed by HP found that the company’s revenue for 2010 was overstated by 54 percent. Operating profit was overstated by 81 percent. Autonomy was found to have recorded revenue for deals that were never paid for and claimed false transactions for customers that do not exist. The audit found similar overstatements in Autonomy’s financials for 2011.

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