On an adjusted basis H-P turned in earnings of $0.98 EPS on total sales of $30.69 billion.  This was above its prior guidance of $0.88 to $0.91 per share and above the consensus from Thomson Reuters of $0.91 EPS and $29.9 billion in revenues.

HP showed the following in PC and tech sales:

• Personal Systems Group revenue was flat year over year with a 5.5% operating margin.
• Commercial revenue increased 3%
• Consumer revenue declined 4%
• Workstations revenue was down 1%
• Desktop units were up 5%
• notebook units were down 6%
• total units were down 1%.

Results elsewhere are as follows:

• Services revenue declined 1% year over year with an 11.3% operating margin
• Imaging and Printing Group (IPG) revenue declined 10% year over year with a 13.2% operating margin.
• Enterprise Servers, Storage and Networking (ESSN) revenue declined 6% year over year with an 11.2% operating margin.
• HP Financial Services revenue grew 9% year over year driven by a 4% increase in net portfolio assets and a 5% increase in financing volume.
• Software revenue grew 22% year over year with a 17.7% operating margin, including the results of Autonomy… but it noted “Autonomy saw a significant decline in license revenue.”

HP spent $350 million of cash during the quarter to repurchase approximately 13 million shares of common stock in open market transactions and the company exited the quarter with $8.7 billion in gross cash.

Cutting another 8% of the workforce in the coming year or more is not going to come without pain.  What is also helping is that the crummy news coming out of Dell caused Dell’s worst day in a decade or more and that set the bar very low for H-P.  H-P closed down 3.2% at $21.08 against a prior 52-week low of $21.28, but shares are up 5.7% at $22.33 in the after-hours session.

Microsoft Corporation (NASDAQ: MSFT) is not winning with H-P perhaps on lower total unit sales.  Shares closed down 2.2% at $29.11 and the stock is at $29.04 in the after-hours.  Intel Corporation (NASDAQ: INTC) is facing the same after a 2.3% drop to $25.44 today and the after-hours session is down at $25.35.

JON C. OGG

In the first phase of the trial, a federal judge narrowed the litigation over Oracle’s copyright claims and upheld a portion of Oracle’s claims. In the third phase the judge will assess damages against Google for its infringing use of some parts of Java code in Google’s Android operating system. Oracle has indicated that it intends to seek a seriously large payment for the infringement. Oracle has also said that it will appeal the jury’s verdict.

The verdict did not affect either company’s share price during today’s trading session. After hours both are down slightly.

Paul Ausick

When you see a drop of 17% on Dell, you might expect that the volume was 100 million shares or so.  As of 11 AM EST we have still not even seen 40 million shares trade against an average volume of 16.5 million.  The volume is strong, but this feels like the sort of news that would drive 100 million shares.  That being said, Dell traded 51,440,000 shares per NASDAQ trading data on its last earnings report day-after.

Hewlett-Packard Co. (NYSE: HPQ) is set to report earnings today after the close of trading and estimates are $0.91 EPS and $29.92 billion in sales.  Let’s just say that it is safe to assume that the estimates have unofficially come down significantly.  H-P shares are down 4.6% at $20.77 and this is a new 52-week low.  As a reminder, HP is expected to announce a major round of tech layoffs today as part of its restructuring.

This appears to be the worst trading day in more than a decade for Dell on a percentage drop.  Dell is down 17.1% at $12.50 now and the prior 52-week range is $13.29 to $18.36.  Dell is now probably under 6-times forward earnings estimates after the drop and H-P is roughly the same.  The problem is that no one is willing to pay for contracting earnings power of this sort.  Dell offers no dividend to entice shareholders to stay around, and HP offers at least a yield of about 2.2% based on today’s price.

Intel Corporation (NASDAQ: INTC) is down 3.2% at $25.19 and Microsoft Corporation (NASDAQ: MSFT) is down 2.9% at $28.90.

Elsewhere in key PC components, the fallout continues… Seagate Technology PLC (NYSE: STX) is down 2% at $25.81 against a recent high of $32.55 and Western Digital Corp. (NYSE: WDC) is down 2% at $33.82 against a recent high of $44.44.  We warned investors not to chase those on the last round of good news as it should have been anticipated at the end of 2011 and in the first quarter of this year.  It may seem a bit of a surprise, but the US king of DRAM via Micron Technology Inc. (NASDAQ: MU) is down only 0.2% at $5.70 because it is already down so much from the highs of $10.23 over the last year.

It goes without saying… wrecking balls swing back and forth, and the damage is severe.  Dell has become technology’s wrecking ball and having a ”LOW P/E VALUATION” is about as relevant as gold to a dead man today.

JON C. OGG

The companies announced that SAP America has entered into an agreement to acquire Ariba for its cloud-based business commerce network at a price of $45.00 per share.  This generates and enterprise value (equity and debt) of about $4.3 billion.  The Ariba board of directors has already approved the transaction unanimously and the buyout represents a 20% premium over the May 21 closing price.

Today’s acquisition will combine Ariba’s buyer-seller collaboration network with SAP’s customer base and business process expertise “to create new models for business-to-business collaboration in the cloud.”

SAP is worth almost $70 billion in market value and its $58.77 share price for ADRs compares to a 52-week range of $47.39 to $72.52. Ariba shares were up 0.8% at $37.96 before being halted and the 52-week range is $21.90 to $40.45. With Thomson Reuters having a consensus estimate of $0.99 EPS for 2012, SAP is effectively paying 45-times earnings for Ariba.

JON C. OGG

Besides competing with smaller national rivals like RadioShack Corp. (NYSE: RSH) and GameStop Corp. (NYSE: GME), Best Buy has to slug it out with retailers Amazon.com Inc. (NASDAQ: AMZN), Wal-Mart Stores Inc. (NYSE: WMT), and direct sellers like Apple Inc. (NASDAQ: AAPL).

And while Best Buy touts its increases in sales of mobile phones and other portable devices, it also notes:

Areas of comparable store sales growth in the Domestic segment included tablets and mobile phones within the Computing & Mobile Phones revenue category, eReaders within the Consumer Electronics revenue category and Appliances. These increases were more than offset by comparable store sales declines primarily in notebooks within the Computing and Mobile Phones revenue category, gaming within the Entertainment revenue category, and digital imaging and televisions within the Consumer Electronics revenue category. The Domestic segment online channel revenue grew 20 percent compared to the prior-year period.

Selling more cheaper devices does not make up for lost sales in pricier items, unless a retailer can sell an enormous number. Best Buy can’t do that because there’s simply too much competition from wireless carriers, other retailers, and direct sales.

The company reiterated its full-year adjusted EPS guidance of $3.50-$3.80, in-line with the consensus estimate of $3.59. But weak international sales and declining same-store sales mean that Best Buy will be forced to close more stores, which will hurt revenues and ultimately profits unless the company can really figure out a way to boost its online sales. The outlook is probably not as rosy as the company would like us to think.

Shares are up about 1.6% in the pre-market, but were up as much as 6% at one point. Current price is $18.43 in a 52-week range of $17.53-$32.85. The 52-week low was set yesterday.

Paul Ausick

Microsoft may ship tens and tens of millions of Windows 8 enabled devices, but Wall St.’s most significant concern is that very few of these will be mobile devices, the supposed future of operating systems as the demand for PCs falters.

Microsoft’s largest bet on mobile versions of Windows is its partnership with deeply wounded handset company Nokia (NYSE: NOK). Its new smartphones, part of its Lumia brand, have only sold modestly well, and continue to be swamped by sales of Apple (NASDAQ: AAPL) iPhones and iPads, and a new generation of Google (NASDAQ: GOOG) Android-powered devices.Ballmer’s comments about Windows 7 don’t mean much.

Douglas A. McIntyre

Faber notes that while the number of job cuts are not yet known, sources indicate that the turnaround of the company is going to include thousands of layoffs.

The question that has to be asked here is one of relevance.  H-P is a DJIA component and it is worth under $44 billion in market capitalization since the stock is down more than half from the peak in early 2011.  This company employed a whopping 349,600 employees as of October 31, 2011 per its annual report.

What is so sad here is that the market is completely discounting H-P.  Literally, this stock trades at less than 6-times its expected earnings.  The company was going to jettison its PC business, but the turnaround plan under Meg Whitman determination was that it would just cost too much to break the PC unit out of H-P.

The market either just does not believe that H-P can live up to its earnings through time or it has just reset what the company’s valuation really is.  Under 6-times earnings is not expensive by any count as long as those earnings can be maintained.  Rival (at least in PC sales) Dell Inc. (NASDAQ: DELL) now trades at only about 7.5-times its forward earnings.

H-P is already loaded up with enough debt of over $25 billion even if it does have a $19 billion cash and liquidity arsenal.  Earnings are next week and the layoffs are expected to be announced sometime around that report.  The current targets for the April-end quarter are $0.91 EPS and $29.9 billion in sales according to Thomson Reuters.

H-P is up three-cents at $22.06 and the 52-week trading range is $21.50 to $37.70.

Apparently the slogan on a tee-shirt is true, “The beatings will continue until morale improves.”

JON C. OGG

The market value is still the largest of any public company at $501 billion, but the market value is now down almost $100 billion from the actual peak.  We have reported on two recent occasions how weak iPhone sales projections from analysts seem to be the big concern.  Both reports indicate that the iPad will save the day, and the latest earnings report showed that China really saved the day (with purchases rather than cheap labor).

The consensus analyst target on Apple is now above $708.00 and that implies another 32% upside if the analysts are right.  Some analyst calls even target $1,000 (and higher) for Apple stock.  At that rate, it becomes cheaper to buy Apple’s products than it does to buy 1 share of Apple stock.

Maybe this is the peak valuation concern coming into play as well.  Microsoft Corporation (NASDAQ: MSFT), which ultimately may have saved Apple with a Gates-led investment, reached up close to the $600 billion or so at the peak in 2000.  Cisco Systems Inc. (NASDAQ: CSCO) also reached about $350 billion.

General Electric Co. (NYSE: GE) peaked somewhere around the $475 billion valuation.  Exxon Mobil Corporation (NYSE: XOM) also peaked out above $500 billion during the energy bubble run-up, but that has not been seen since and the current market value is about $385 billion or so.  The common theme is that all of these values have come crashing down.

There is one thing to consider here in the ’mega-cap valuations and that is that Exxon Mobil is the only stock that had a low valuation like Apple still has.  In fact, Apple now trades at only about 10-times the Fiscal 2013 earnings estimates now that it has pulled back over $100.  Its multiple is even less than that if you back out the $100+ billion treasure trove that the company has.

The focus ahead has to be on Apple TV.  iPad and iPhone sales may only be able to go so far, and now it will be up to the new devices.  One concern we have is that the story of the Mac is a lost one.  Honestly, when was the last time you heard anyone focused on Mac sales in the last few months?  It is all about iPads and iPhones, which are actually cannibalizing what would have been Mac sales, and the talk remains around Apple TV.

One issue to consider is that certain funds have had to lighten up in Apple shares.  The large institutional sales orders have not been very evident in recent months, but the reality is that Apple started to become too heavily weighted for many non-index fund managers.  To prove this in the NASDAQ 100, the PowerShares QQQ (NASDAQ: QQQ) has close to an 18% weighting in Apple.  We have seen one estimate that only about one-third of the share selling was tied to large funds and hedge funds, although that no longer be the case since that data is 45 days old (or longer).

What seems to be at work is simply a change of heart.  The stock was weak ahead of May and the stock was still above $600 as recently as April 27.  Still, the psychology of “Sell in May and go away!” has been exaggerated due to the woes of Europe, the slowing growth of the BRIC nations, and weakening U.S. economic data.

Another concern may be that Microsoft Corporation (NASDAQ: MSFT) is being favorably treated going into the Windows 8 launch later this year.  All of the companies in technology are talking this up.  It is even possible that investors are unloading shares just so they can buy up Facebook shares after the IPO on Friday.

Apple is not expensive at all.  The question is whether or not it can be maintained.  When you are paying 10-times for future earnings today, that implies that you are paying for earnings out about ten years on a static basis.  All that is happening after the massive run that has been seen over the last decade is that the growth rate cannot be maintained indefinitely.

This sentiment won’t last forever, but the focus is elsewhere for the time being.  Will Apple hit $500 or even lower?  Maybe.  As long as the market does not really tank and as long as we do not enter a second recession, the consensus is that Apple’s stock still has a lot of room to rise after the dust settles.

JON C. OGG

What is interesting is that this is all taking place when Apple Inc. (NASDAQ: AAPL) has been a huge disruption force.  Mac sales have grown, but the iPad has been the true disruption as consumers are flocking to the tablet for casual web use and media use and keeping older desktops and/or laptops to use for more heavy issues.

This morning at the J.P. Morgan Global Technology, Media and Telecom Conference came word from AMD’s CEO Rory Read that demand is picking up in the personal computer space.  The pickup was said to be for both 2012 and for 2013, although that is a company prediction.  He even went on to note that the personal computer market will have a single-digit rise this year and that the growth will be back-end loaded for the second half of this year.

The strength is based upon AMD’s Trinity processors for laptops after many key design wins.   AMD shares are up only $0.04 at $6.79 against a 52-week trading range of $4.31 to $8.73 and its market capitalization rate is $4.76 billion.

Now the company just has to go out and execute on its strategy.  Unfortunately, that has always been the hard part for AMD to maintain and that is regardless of the PC sales climate.

JON C. OGG

Revenue was in line with estimates at $1.71 billion.  For 2012 Cognizant forecasts $7.34 billion in revenue and profits of $3.36 per share, and that is actually under the Thomson Reuters targets of $7.54 billion in sales  and $3.45 per share in earnings.

Today’s news should not be a surprise to most investors,  Indian IT-outsourcing outfits such as Wipro Ltd. (NYSE: WIT) and Infosys Ltd. (NASDAQ: INFY) as sector leaders.  Now it is Cognizant’s turn for the drop in shares and this one is down over 15% a $59.09 and the 8 million shares traded early this morning is nearly 300% above its normal trading volume.

Wipro shares are down 1% at $9.33 and Infosys shares are down 1.2% at $45.09 in New York trading of the ADRs.

Computer Sciences Corporation (NYSE: CSC) remains ‘challenged’ with its shares at $27.00 versus a 52-week range of $22.80 to $45.14.

JON C. OGG