The Dividend Daily

PC and printer giant Hewlett-Packard Company (HPQ) said late Wednesday that it is buying networking equipment maker 3Com (COMS) for $2.7 billion in cash, and also released preliminary fourth quarter results that beat expectations.

The proposed deal, which was approved by both companies’ boards, is for $7.90 per share of 3Com stock. That fetching price represents a 39% premium over 3Com’s Wednesday closing price of $5.69.

HP said the acquisition would strengthen its networking presence, as well as give it a bigger foothold in the Chinese networking market. “The networking world will be completely transformed” once the deal is completed, the company boasted.

Hewlett-Packard also pre-announced its fourth quarter results, and raised its 2010 full-year guidance. It said that fourth quarter earnings will be 99 cents per share, up 18% from last year, or $1.14 per share on an adjusted basis. Revenue was said to be $30.8 billion down 8% from the year-ago period. On average, Wall Street analysts expected $1.12 per share on revenue of $29.8 billion.

Looking ahead, HP said it now expects 2010 earnings of $3.65 to $3.75 per share, up from its prior outlook for $3.60 to $3.70 per share. Excluding one-time items, adjusted profit is expected to be $4.25 to $4.35 per share, while analysts expect $4.28.

It also boosted its revenue outlook, saying it sees revenue of $118 billion to $119 billion, compared with previous estimates for $117 billion to $118 billion. Analysts currently expect $118.2 billion.

Hewlett-Packard shares fell 55 cents, or -1.1%, in premarket trading Thursday.

The Bottom Line
We recently removed shares of HPQ from our “recommended” list on Oct.1, when the stock was trading at $27.21. The company has a .64% dividend yield, based on last night’s closing stock price of $50. The stock has technical support in the $45 price area. If the shares can firm up, we see overhead resistance around the $53 price level. We would remain on the sidelines for now.

Hewlett-Packard Company (HPQ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.