Will H-P Divest Core Businesses?

After shares plunged 45 percent over the past year, Hewlett-Packard (NYSE:HPQ) may cut loose some of its weaker elements, including its PC and printer divisions, which together accounted for 49 percent of the company’s total sales in fiscal 2012.

H-P saw a rough slide down through the stock market in 2012, but 2013 is the chance for some changes to bring the company back into the game. However, the game H-P plays from now on may be quite different than the one it’s played so far. Though previously Meg Whitman, CEO at H-P, said she didn’t plan to sell off the company’s PC section, it seems more and more possible as the company looks at ways to shed “assets and businesses that may no longer help [them] meet [their] objectives.”

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CHEAT SHEET Analysis: Could divestitures boost H-P’s shares?

One of the core components of our CHEAT SHEET Investing Framework focuses on catalysts that will move a company’s stock. If H-P decides to remove its PC or printing division, the company would surely see a shift in revenue, but it’s uncertain whether it would be up or down. The drop in revenue would be massive if either division was lost, but either division could also be costing H-P profits.

Large divestitures by H-P may frighten some shareholders, but others that are looking toward the future of the company may see how current divisions won’t lend to the company’s long-term objectives. Cutting the fat now may make for a stronger company, and stock, in the long term.

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