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Monday, November 24, 2008

Hewlett Packard (HPQ) conference call commentary

EDS helped a lot. Check this slide out:

Ex-EDS, sales slowed substantially.

HP both raised prices on ink and plans to raise it further. Channel inventories went up 1/2 a week. They said it had to do with sell-out slowing down at the end of the quarter, as if to say inventory in the channel didn't go up much on a dollar basis -- the days to sell went up because they're selling less per day. If there's a price increase in there, too, it would follow that dollars should have gone up a lot. The language around this is confusing. The impression management gave was there isn't much to make of it. I'm going to give them the benefit of the doubt. Ink is a consumable and printers are an evil market -- you sell the hardware for nothing and gouge the hell out of your customer with ink. Those $39 printers are awesome but it costs you $50 to refill it with ink. It's diabolical.

Inventories in the channel also rose a week in PCs, as one would expect for the seasonal period. Of course, this year is anything but seasonal. They dialed 1Q:2009 down on an anticipated slowdown. I would speculate 2Q:2009 could also come in lighter as it looks like they stuffed the channel a little on PCs. It doesn't sound like it when you listen to them as they say they're gaining lots of share and notebooks are accelerating.

The company's financing group showed good growth in the quarter and the company plans to tap the Fed's commercial paper facility. Good for them, they're actually borrowing money from the government and loaning it to customers like they're supposed to. Dell, which took a whack on growth this quarter, pulled back from customer financing due to the risks. Hewlett Packard is going the other way. If the economic spiral stops and we have a regular recovery, HP will benefit from being more aggressive.

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