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Hewlett-Packard to Buy 3Com for $2.7 Billion; Outlook Raised (HPQ)

By Dividend.com Staff
November 12th, 2009

hewlett-packard-to-buy-3com-for-2-7-billion-outlook-raised-hpq

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.

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Disclaimer: Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. The author is not registered as an investment adviser. The author may or may not hold positions in the securities mentioned in this article or video. The author relies upon the "publisher's exclusion" from the definition of "investment adviser" as provided under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws.