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Mark Hurd is the lucky one. If you're buying shares of Hewlett-Packard
Why? HP isn't going to get anywhere near enough value for the $1.2 billion the company spent to acquire Palm, or the $2.1 billion spent to wrest 3PAR from Dell's
This isn't to suggest that neither deal has value. To the contrary:
- Storage is an imperative in data infrastructures and HP's primary competitors, IBM
(NYSE: IBM)and Oracle (Nasdaq: ORCL), both offer storage products and services to customers. 3PAR will help fill out HP's portfolio in this area.
- Palm, meanwhile, is poised to help HP reduce its dependence on Microsoft
(Nasdaq: MSFT)for mobile and PC operating software.
But in each case, HP badly overpaid. Just as it has with most every move it's made lately.
Consider new CEO Leo Apotheker, possibly HP's most important asset right now. He's joining the company from middling German software giant SAP, where he obtained essentially zero experience that should help him lead HP in the bare knuckles fight to come. But never mind that -- Apotheker will still get $1.2 million in annual salary anyway, the same as Hurd received when he was running the company, Computerworld reports.
HP is, in effect, a zombie, eating as many brains as it can with the hopes of getting smart enough to compete with deep-pocketed, experienced rivals.
Run Fool! Run!
Fools don't typically cite overpaying for talent or acquisitions when they talk about HP, but you'll find plenty in our Motley Fool CAPS community who are as frightened of this three-star stock as I am:
"Change [in] leadership to an unproven and little regarded leader will subdue the stock [o]ver the short-term. Investor confidence will be directed to those companies in the sector that are more stable and reliable as a value proposition," wrote Foolish investor bromere earlier this month.
Recent market moves suggests he's right. Apple
Night of the living dead developers
There's a reason investors aren't buying. HP's growth prospects aren't clear. All we know is that HP wants to be a full-service technology provider, on par with IBM and Oracle. What's missing is any evidence of an obvious, defensible competitive advantage.
Unless, that is, you count market leadership in printers as a competitive edge. (I don't.)
Time is running out for HP's Palm efforts to have any impact on Apple or Research In Motion
But again, don't take my word for it. According to Nielsen data, iOS, BlackBerry OS, and Android are the leading smartphone systems here in the U.S. Palm, once a player, doesn't even merit a mention.
Maybe that will change when HP introduces its first line of WebOS smartphones early next year. I wouldn't bet on it; Palm's widely acclaimed Pre didn't change when it had to go up against the iPhone.
And what about tablets? Hurd sounded the tablet theme at the time of the Palm deal, but as of today, the company is selling Windows 7 tablets. If there's value being created by the team acquired from Palm, we aren't seeing it yet.
And we may never. Because here's the truth about zombies: No matter how many brains they eat, they never, ever get smarter.
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Looking for additional scary stories? We've got what you need in our Halloween special series, Avoid These 8 Investing Horror Shows.
Apple and Amazon.com Motley Fool Stock Advisor selections. Microsoft is a Motley Fool Inside Value pick. Motley Fool Options has recommended subscribers open a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days.
Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He had stock and options positions in Apple and stock positions in IBM and Oracle at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool owns shares of Apple, IBM, Microsoft, and Oracle and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy isn't afraid of Wall Street. Boo!