Hewlett-Packard (HP) shares plunged 20 percent on Wall Street on Friday after the world’s top personal computer maker announced a dramatic strategic shakeup that includes spinning off its PC business.
Shares in HP lost 20.03 percent to close at US$23.60, wiping more than US$12 billion off the California-based firm’s market capitalization.
HP shares, which shed 5.99 percent on Thursday, are trading at their lowest levels in six years.
HP announced on Thursday it was exploring a spin-off of its PC unit, or Personal Systems Group (PSG) and buying British enterprise software company Autonomy for US$10.24 billion as it refocuses on software and technology solutions.
In a further move away from consumers, HP said that it was stopping production of its TouchPad tablet computer, its rival to Apple’s iPad that was introduced just seven weeks ago and phones based on the webOS mobile operating system acquired from Palm last year for US$1.2 billion.
Deutsche Bank analysts said the HP moves raised “red flags” and recommended that investors sell the stock.
“We believe this strategic evaluation has the potential to be extremely disruptive to the normal course of business,” Deutsche Bank said.
“In aggregate, we question the timing of parallel strategic actions [acquisition and PC spin-off] in the midst of a meaningful deterioration in HP’s core operations and lowered guidance,” it said.
Shaw Wu of Sterne, Agee & Leach expressed concern that HP “may be stretched thin trying to do too many things at the same time including its purchase of Autonomy, shutdown of its webOS hardware operation, not to mention dealing with the uncertainty around its PC business.”
Gregori Volokhine of Meeschaert Capital Markets said a number of HP’s past acquisitions had been “disastrous” and noted that the company is essentially jettisoning Palm’s webOS platform less than 18 months after buying it.
“They want to become a direct competitor of SAP, IBM and Oracle,” Volokhine said of HP’s strategic shift. “Those are big players.”
Credit rating agency Standard & Poor’s said meanwhile that it was placing HP’s “A” corporate credit rating and “A-1” short-term rating on CreditWatch with negative implications.