In light of HP’s (NYSE:HPQ) announced acquisition of Autonomy and the anticipated spin-off of its PC business, we wanted to highlight the three most valuable businesses for HP. HP competes with large tech players like IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT) and Dell (NASDAQ:DELL) in several business verticals.
(1) HP Services – 33% of HP’s Stock
Besides selling PCs, printers, ink and toner to consumers, HP is focused on helping medium to large businesses figure out how to improve their business and IT operations. They do this through their HP Services business which includes services like: (i) infrastructure outsourcing (ii) technology services (iii) application outsourcing (iv) business process outsourcing.
Basically, they help these businesses figure out how to better leverage technology (some of which is sold by HP) to do things more efficiently (save money). HP acquired EDS in 2008 to enhance its outsourcing business, and we believe the step has helped HP move in the right direction as outsourcing gains traction in an increasingly competitive and open business environment. With such services, HP can better compete with players like IBM, Dell and Accenture.
We estimate that HP Services accounts for about 33% of HP’s value.
(2) HP Printers & Ink Cartridges – 25% of HP’s Stock
HP is the global leader in the printer market with nearly 40% share in printer units sold globally as of 2011. But it’s not the printer hardware profits that make HP executives smile. If you’ve suffered sticker shock looking at printer ink and toner prices at Staples, you’ve come face to face with the money maker of HP’s printing business. Those hefty ink and toner prices (and margins) make HP’s printing business the second most valuable business for HP, accounting for about 25% of the Trefis estimate for HP’s stock.
(3) Servers & Storage – 16% of HP’s Stock
HP’s servers and storage business helps the company deliver technology hardware to the medium to large business customers that are served by HP Services. Such customers spend significant amounts of money on IT infrastructure involving servers and storage. We estimate that the Servers & Storage business accounts for about 16% of HP’s value.
Collectively, the top three HP segments highlighted above make up about 75% of HP’s value.
