HP resembles a pitiful, helpless giant
Hewlett-Packard is faltering hard, losing market share to Apple and EMC.
Here are the three biggest:
1. The enterprise is still strong, which means that EMC (EMC) is seeing great strength, although it will most certainly be knocked down by the "sweeping generalization" types. This is cloud/virtualization; the group got hit Tuesday and most likely will be today -- a good place to buy.
2. The personal computer is weak. We don't know whether that's because of the Apple (AAPL) competition and the iPad freezing the market, but it seems like a decent bet. The decline is too big to explain it away by saying weak consumer demand, especially given how strong both smart-phone and iPad sales are. This is looking more and more like Apple has a completely destructive technology.
3. The low-end router biz of HPQ is eating Cisco's (CSCO) lunch but isn't doing so well for HPQ's margins. Hewlett is making too many low-end deals on routers that are taking away core Cisco business.
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The conclusion: Rather than say the industry is soft, it seems more accurate to conclude that HPQ is faltering -- and faltering so hard that it is losing share to Apple and EMC, although the latter is harder to prove, because it is so robust.
Here's where I am coming out: Apple is to Hewlett as all of the other discounters are to Wal-Mart (WMT). In other words, some of the newfound better-than-expected growth is coming out of one company -- HPQ -- and into another.
If you think back to Dell (DELL), you could draw the same conclusion. The Apple iPad is that powerful. Hewlett seems to be a spent company, a consumer play with some corporate biz that is not strong enough to offset the weakness. In that sense, still one more parallel to big dogs doing badly: Cisco. Its consumer business is struggling, too, and is up against some solid competition in a shrinking desktop market because of saturation and a decline in capital expenditures.
Given how big the installed base is for HPQ, given how strong the iPad is coming on, this ugly trend may be in its infancy, which is why it makes so much sense that HPQ is down so much. In early trading today, shares were down 11.4% at $42.73.
Moreover, HPQ continues to while away its shareholders' money by spending $2.3 billion on buybacks and $175 million on dividends. To me, the buyback is a gigantic mistake that the company -- like so many tech companies, including Cisco -- refuses to own up to. Without that dividend protection, without momentum, without strategy, HPQ seems like a pitiful, helpless giant that remains a sell, even after this decline.
At the time of publication, Cramer was long Apple and EMC.
Follow Cramer's trades for his charitable trust.
At the time of publication, Cramer was long Apple and EMC. Nuff said.
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