Hewlett-Packard Detects a New Market

Hewlett-Packard (NYSE: HPQ  ) dropped a lot of good news on investors yesterday and the share price, up about 4%, shows it.

CEO Mark Hurd began the party by announcing that revenues had jumped 5.4% to $21.9 billion in the past quarter -- suggesting that HP might overtake IBM (NYSE: IBM  ) as the largest technology-related company by year's end. Hurd then kept things rolling by disclosing that his cost-cutting efforts are continuing to pay significant dividends -- GAAP net income is up to $1.38 billion from a modest $73 million a year ago. He also unveiled a $6 billion share buyback plan.

If there's any cloud hanging over HP's stock, it's that analysts are beginning to question how the company's stock will continue to grow once Hurd is done squeezing out cost savings. In short, they're wondering where the new organic sales growth will come from.

It's a good question. My guess is that Hurd believes the company's recent acquisitions of Mercury Interactive Corp. and Peregrine will beef up its software business, but I believe he also has his eyes on some future markets.

In an upcoming issue of Nano Letters -- a technical journal of the American Chemical Society -- HP researchers, working in partnership with researchers at the University of California at Irvine, describe a new process for manufacturing nanoparticle-based ultrasensitive chemical sensors that have the potential for detecting a single molecule of an explosive or other hazardous chemical.

The detection system, which can be built using existing semiconductor manufacturing methods, suggests that the sensors could be employed on battlefields and even in airports, where they might be able to detect the minutest presence of a variety of liquid explosives.

Such sensors, much like HP's work in the field of molecular electronics, are still a few years away from the commercial marketplace, but if the company can find organic growth from its software business over the next couple of years, I think it should be able to keep the momentum going into the future. It will also offer Hurd a chance to demonstrate that his executive-level skills are not simply relegated to slashing costs.

Interested in detecting other small tech plays? Sign up for a free trial of Motley Fool Rule Breakers here.

Fool contributor Jack Uldrich is the author of two books on nanotechnology, including Investing in Nanotechnology: Think Small, Win Big. He owns stock in IBM, but not HP.The Motley Fool has an ironclad disclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 515478, ~/Articles/ArticleHandler.aspx, 10/23/2014 5:01:57 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement