HP Settles DOJ Litigation - Analyst Blog

As per the latest disclosure made by the largest computer maker Hewlett-Packard Co. (HPQ), the tech major has agreed to settle a lawsuit in principle imposed against it by the Department Of Justice (DOJ).

The government body has previously accused Hewlett-Packard and other tech giants, of paying illegal consideration to Accenture (ACN) for securing endorsement for Government orders.

Although the tech major has denied its involvement in the case, but expects that the settlement will result in an outflow of $50.0 million, which is expected to lower its third quarter profit by 2 cents per share.

This lawsuit dates back to the year 2007, when Microsoft Corp. (MSFT) first initiated this lawsuit, and the Government agency with others to form a combined lawsuit against the three tech majors namely, HP, Sun Microsystems and Accenture.

These companies were accused of forming an illegal cartel for securing government contracts. Although this lawsuit may have a trivial impact on the reputation of the company, but we believe that the current achievement of the company will make up for it.

As per the latest findings of the market research firm IDC, global PC shipment in the second quarter 2010 inched up to 22.4% year over year, while another research firm Gartner calculated the growth to be 20.7%. The findings of IDC also confirms the fact that, the market leader Hewlett-Packard retained the first position worldwide, with an 18.1% market share, which declined marginally by 1.6% as a result of lower international sales.

It seems that while all the tech companies are reaping the benefits of improved macroeconomic fundamentals across the globe, the maximum benefit has been tapped by the tech major Hewlett-Packard. Everything seems to be in favor of HP. As per a recent report published by Gartner, HP also grabbed the leading position in the server market during the first quarter of 2010.

Although we remain positive about the company’s performance going forward given that the demand has been improving, we believe competition from other big technology companies, such as Cisco Systems (CSCO), Apple (AAPL), Microsoft, Google Inc. (GOOG), as well as smaller Asian players continue to intensify in our opinion.

On the other hand, we also believe that the tech giant will come out of this legal development against it, keeping its reputation unscathed.

We currently have a short-term Zacks Rank #3 (Hold) rating on Hewlett Packard.
 
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