Observations from HPQ

HPQ revenues grew 4% year over year(after adjusting for weaker dollar) nothing to be too happy about but given the low valuation, its not that bad for HPQ. Strong storage and server quarter with nice turn around from last quarter leading to largest number of INTC based servers shipped during a quarter. Might have shipped bit too many inkjet printers into the channel in October due to new product launches, but how they move out of the channel remains to be seen. The big trouble this quarter was HP Financial Services which saw profitability drop due to increased reserves for aged recievables, which in normal speak would mean that they lent money to people they don't expect to collect from now. Enterprise spending continues to track higher while consumers have softened, similar to what DELL was saying as it drove higher than usual discounts towards the end of the quarter due to soft demand. According to HPQ, consumer spending has started OK but nothing spectacular. Notebooks have softened little bit whereas desktop has improved. HPQ will drive higher discounts in Printers in 2005 to win market share for future growh of its highly-profitable printer-supplies business, not really a good thing for LXK, Cannon, Epson, DELL or, XRX who compete with HPQ in the printers. I would expect many of the PC related semiconductor companies such as INTC, AMD, IDTI, TXN, ICST, FCS, IRF to trade up due to better than expected trends right now, the end demand in consumers still leaves fair amount of uncertainty though.