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LOS
ANGELES - Wall Street showed Hewlett-Packard Co. what it
thought of the company's plans for a dramatic
transformation: Shares plunged 20 percent to their
lowest point in more than six years.
The
technology giant shed about $12 billion of its market
value as more than half a dozen Wall Street analysts
downgraded its stock, citing a litany of concerns over
the company's ability to reinvent itself.
Friday's
drop of $5.91, to $23.60 a share, came a day after HP
said it would seek to spin off or otherwise divest
itself of its personal computer division, which had made
it the world's largest PC maker and had provided 30
percent of its revenue in its latest quarter.
The
company also said it would halt production of its
TouchPad tablet and line of smartphones and, as one key
to its reshaping, would pay about $10.3 billion for
British business software company Autonomy Corp.
The moves
surprised analysts and investors and left them worried
that the world's leading personal computer maker had
picked a perilous time to bail out of its biggest
business.
"HP
getting out of the computer business is like McDonald's
getting out of the hamburger business," said Jayson
Noland of Robert W. Baird & Co., who downgraded the
stock to neutral from outperform. "It's a pretty
major change, and doing it in the middle of difficult
macroeconomic times is going to be challenging."
With the
future of HP's computer division up in the air, Noland
said, larger customers may turn to established computer
vendors such as Dell Inc. HP said it could take up to 18
months to sell or spin off its PC unit.
Analysts
also fretted that the effect of radical adjustments to
three of its major business lines — computers,
software and mobile devices — might upset the balance
of its tightly choreographed global operations.
"We
are worried that (HP) may be stretched thin trying to do
too many things at the same time," Sterne Agee
analyst Shaw Wu wrote in a note to investors. Wu
downgraded the stock rating to neutral from buy.
HP also
drew second guesses for its decision to offer such a
hefty price for Autonomy. Though the smaller firm's
sales amount to about 1 percent of HP's revenues, the
Palo Alto technology giant paid what amounts to 15
percent of its market value for Autonomy, analysts said.
"We
think this may not be the best use of (HP's) cash today
given its depressed share price and the high price
tag," analyst Avi Silver of Credit Agricole
Securities Inc. wrote in a note to investors. Silver
downgraded HP stock to underperform from outperform.
Analysts
also wondered what HP would do with its WebOS mobile
operating system, the software that runs on its TouchPad
and smartphones.
The
software has garnered rave reviews from consumers, and
was one of the prize spoils in HP's April 2010
acquisition of phone-maker Palm Inc. for $1.2 billion.
But the imminent demise of HP's Pre, Pixi and Veer
phones leaves the future of WebOS in doubt.
Some
observers have speculated that HP might sell WebOS to a
phone maker looking to compete with the increasingly
dominant Android operating system from Google Inc. and
iOS on Apple Inc.'s iPhone.
William
Kreher, an analyst at Edward Jones and Co., thought that
hopes of WebOS finding a new home were fading.
"We
don't expect to see much in the way of WebOS innovation
at this point," he said. "It's essentially
been left for dead."
HP stock
was also downgraded by analysts at Deutsche Bank,
Needham & Co., UBS and Cross Research.
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