Hewlett Packard – Lets Think About Financing Assets

Hewlett Packard (HPQ) came out with Q3 numbers which they should be proud of. Investors rewarded themselves by bidding up the stock and declaring the enterprise value has increased. Much of the positive results come from non US earnings. In what has become a very common comment on many earnings releases revenues for operating units in Asia and Europe, Middle East and Africa (EMEA) were substantially ahead of what the domestic US operations could deliver. Roger so far, nothing new we think.

The long term financing of receivables and other assets has increased by 35% from approximately $7.6 billion as at Oct 31, 2007 to $10.3 billion on July 31, 2008. Revenues are not up 35% during the comparable time frame. We need greater clarity on what is happening within the finance unit and how the assets are allocated.

US oriented investors normally think of financing in terms of American-Euro centric jurisprudence. If someone reneges on his lap top lease from a small tropical country what recourse does HP have. They may not care about their credit ratings.