Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Hewlett-Packard ... Hungry!

Good morning, investors, and welcome back to "Breakfast With the Fool." Grab a cup of joe and sit yourself down while we scan the morning papers together. So what have we here? It looks as though Hewlett-Packard (NYSE: HPQ  ) isn't content with being the world's biggest PC maker anymore. Now HP wants to corner the market on IT services as well. HP ... hungry!

HP announced yesterday that it may spend $12 billion to purchase rival IT service provider EDS (NYSE: EDS  ) . At first glance, the idea seems to have merit. Swallowing EDS would leapfrog HP past Accenture (NYSE: ACN  ) in worldwide IT market share, and an HP-EDS combo would lag only IBM (NYSE: IBM  ) in this market. What's more, HP's services business boasts beefy 11% margins -- better than twice what HP earns on PCs. So HP's just following the money.

Problem is, following the money may lead to a value trap. Sure, EDS shares fetch just half of HP's price-to-sales ratio. But there's a reason for that. EDS generates only half of the profit margins that HP's IT business earns. Neither HP nor EDS is growing as quickly as IBM is.

It seems to me that HP might be better off looking elsewhere, at what I believe is a stronger player: Accenture. This one may not be cheap eats like EDS, but it would make a more satisfying meal. Accenture is growing more rapidly than its rivals are, is more profitable than HP, and sells for a lower price-to-sales multiple than its hungry cousin serves up.

Fruit for thought
While you're chewing over those numbers, let me pour you a nice bowl of corn flakes and add a few berries for flavoring. BlackBerries, to be precise. Yesterday, fellow Fool Rick Munarriz gave you the lowdown on Research In Motion's (Nasdaq: RIMM  ) latest temptation for CrackBerry addicts: the BlackBerry "Bold." According to RIM, this "beautiful and bold" smartphone will sell for $300 to $400. The Bold ostensibly targets corporate users -- although Rick thinks the real target may be Apple (Nasdaq: AAPL  ) .

But I wonder: Is now really the best time to be hawking high-priced gadgets to cash-strapped corporate folks? On the cusp of a recession, companies seem more interested in cutting costs and laying off employees than handing out free smartphones. Then again, maybe RIM gave the Bold some new features that we haven't heard about yet. A "speed-fire" button, perhaps? Press a button, and you instantly email a pink slip to the employee of your choice. Now that could make the Bold the must-have appliance for hip HR staffers.

That's what chivalry gets you
I don't want to send you off on a down note, so let's wrap up with a bit of news of the surreal. AP reports that JetBlue (Nasdaq: JBLU  ) has just been hit with a $2 million lawsuit from an aggrieved passenger. On a recent San Diego-to-New York flight, one tourist chivalrously gave up his seat to a tired flight attendant -- with two caveats. First, the move wasn't voluntary. Second, he was told to sit on the toilet. Buh-bye!

Fool contributor Rich Smith does not own shares of any company named in this story. Apple is a Stock Advisor selection. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (10)

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.

Compare Brokers

Fool Disclosure

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: 643482, ~/Articles/ArticleHandler.aspx, 10/24/2016 11:38:51 PM

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...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/24/2016 4:00 PM
BBRY $7.35 Down -0.02 -0.27%
BlackBerry CAPS Rating: *
EDS.DL $0.00 Down +0.00 +0.00%
2020 ChinaCap Acqu… CAPS Rating: No stars
HPQ $13.97 Up +0.17 +1.23%
HP CAPS Rating: ***
JBLU $18.75 Up +0.18 +0.97%
JetBlue Airways CAPS Rating: ****
AAPL $117.65 Up +1.05 +0.90%
Apple CAPS Rating: ****
ACN $115.80 Up +0.21 +0.18%
Accenture CAPS Rating: ****
IBM $150.57 Up +0.94 +0.63%
IBM CAPS Rating: ****