Monday, August 23, 2010

Will HP's Bid for 3PAR Push Up News Sentiment?

The 24 hour news cycle creates a difficult climate for companies that suffer from bad headlines. Companies face a slide in news perception that never seems to go away. Bad news turns to very bad news because it lingers and gets rehashed for days on end. Let's examine the case of Hewlett Packard (HPQ) in Aqumin's AlphaVision Landscape.

Below left, I have a News Sentiment Landscape showing the Short Term News Score of each scoring news story (the Short Term News Score is derived from RavenPack News Analytics and reads -50 as lowest scores and 50 as the highest score). Each Building in the landscape represents that Story Score and those News Stories are grouped by the News Category, such as Stock Loss, Fraud, Dividend Announcement, etc. Tall green buildings have very positive News Scores and tall red buildings have very negative News Scores. Also note, each category is ordered on the landscape by the average score of each group. The very worst average News Sentiment Scores are in the back right and the very best average News Sentiment Scores are in the front left corner.

What does this mean for HPQ? Well, HPQ had the lowest average scoring stories of any major equity between August 5th and August 20th. Actually, most of the tall red buildings in the back corner are HPQ stories, the worst being under the "Corruption" category. There were only a couple of positive scoring stories centered around the earnings announcements.

HPQ News Small Above right, is a detail of the story landscape that shows the effects of the CEO departure. Story categories like Stock Loss, Executive Scandal, Stock Loss and Executive Resignation all damaged the company and HPQ's stock price (to year lows). These News Categories have nothing to do with the economic performance of HPQ, but a lot to do with the perception about corporate governance. The HPQ Board of Directors acted quickly but tone of the sentiment remained very negative. In this case, the quick action was not well received by the market.

This makes me wonder about HPQ's announcement this morning to launch a hostile bid for 3PAR. No doubt HPQ is in a clash with Dell (DELL) for market share, growth and PC domination. This bid could be business as usual in a tough space. But a little part of me thinks this bid is to stem the tide of Negative Sentiment gushing from the open wounds of the Hurd departure. It is tough not to think that when looking at the blood red color of sentiment for HPQ lately on my News Sentiment Landscape.

To see how the 3PAR bid scores on the News Sentiment Landscape, download AV Pro and click the 12 Hour News Score in the AlphaVision View Library. If the sentiment is strong enough, look for HPQ to start to recover in the weeks ahead.

Andrew Giovinazzi

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

1 comment: