Exploring the Future Potential of AI-Enabled Smartphone Processors
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1. Hewlett Packard (HPQ, Buy) Enterprise Infrastructure: Storage Mark Kelleher March 2010
2. HPQ – Key Facts Location : Palo Alto, CA Market Cap : $125.8 Billion FY 2009 Revenue(A): $114.4B FY 2010 Revenue(E): $123.4B FY 2011Revenue(E): $131.2B FY 2009 EPS(A): $3.83 FY 2010 EPS(E): $4.43 FY 2011 EPS(E): $4.91 Net Cash per share: ($0.93) Year end: Oct Next Q report : Apr Q2 Products : ESS, EVA, HP printer & computers, EDS Competitors : ORCL, IBM, DELL, APPL, CSCO, EMC, LXK, NTAP Customers :45% Enterprise, 56% intl HP is a leading supplier of IT solutions to both the enterprise and consumer markets. HP sells storage, servers, services and software to enterprise customers, and personal computers, imaging and printing services to both the enterprise and consumer. Through the use of partners such as Microsoft (MSFT, NR, $32.00) and others, HP is able to differentiate its products by leveraging its vast global distribution, large R&D budget, and large balance sheet by acquiring cutting edge services and products. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com
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4. What They Do Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com
5. What They Do Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com
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7. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Acquisitions Source: Company Reports
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9. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Market Data Source: Company Reports
10. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Market Data - Servers Source: IDC
11. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Market Data – W/ 3Com acquisition Source: IDC, 2009
12. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Market Data - Printers Source: Company Reports
13. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Market Data – PC’s Source: IDC
14. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Products – Q1 2010 Source: Company Reports
15. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com HP Services (includes EDS) Source: Company Reports
16. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Enterprise Storage and Servers (ESS) Source: Company Reports
17. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com HP Software Source: Company Reports
18. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Personal Systems Group (PSG) Source: Company Reports
19. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Imaging and Printing Group (IPG) Source: Company Reports
20. Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Segments driving EPS Source: Company Reports -Services and printers are the key to HP EPS upside. Keep an eye on storage. -Enterprise accounts for 60% of operating income (storage and servers, services and software)
23. HPQ Chart Mark Kelleher (617) 752-1745 mark.kelleher@brigantineadvisors.com Reports Q1 results and guides above the street
24. Valuation Mark Kelleher (508) 655-8193 [email_address] We believe the company can maintain at least 10% revenue and earnings growth over the next several years. Using a P/E/G ratio of 1.2 (a P/E multiple of 12x) on our F2011 EPS estimate of $4.91, we calculate a 12-month price target of $59.00. We believe the company can maintain at least 10% revenue and earnings growth over the next several years. Using a P/E/G ratio of 1.2 (a P/E multiple of 12x) on our F2011 EPS estimate of $4.91, we calculate a 12-month price target of $59.00.
