Hewlett-Packard (HPQ) has averaged a headline a day, or so it seems, for weeks, with its decision to exit its TouchPad tablet computer business and mobile phone business, the hiring of Meg Whitman as CEO, and most recently, with its $10.3 billion purchase of Autonomy Corp.

And, as one might sense, not all of the headlines have been good. Still, Hewlett is worth a review.

In the months ahead, look for Hewlett to provide additional clarity regarding its PC business: HPQ will remain a force in the sector, will not sell it PC business, but Hewlett will continue its trend of emphasizing higher margin units.

Venerable HP Printers

Longer-term, the percent of revenue derived from data center products, software and services will increase. The aforementioned represents an operation adjustment, but investors should not underestimate the power of the present revenue drivers, including HPQ's established printer business.

Moreover, the world is becoming more mobile and tablet-friendly by the quarter, but the desktop PC is not going away anytime soon, and that bodes well for Hewlett.

Operating margins will likely dip in 2011 and 2012, before recovering in 2013.  

Institutional investors have beaten-down Hewlett's stock in 2011, but that's not likely to last. All of the tablet discontinuation news has blotted-out Hewlett's enduring strengths: 1) about 65 percent of its 2010 revenue outside of the United States; 2) no country or customer with more than 10 percent of sales. Yes, Hewlett has that cherished multi-national corporation virtue: geographic footprint diversity.

The Thomson Reuters First Call FY2011/FY2012 EPS estimates for HPQ are $4.87 to $4.83, and that F2012 EPS estimate looks about 5 percent low according to my analysis.

Technical Analysis

Technically, Hewlett's shares have been in a bear hug for almost all of 2011 -- a staircase down from about $50 to roughly $25. And, as noted, in classic bear-hug fashion, the stock has dropped after it approached/touched the key, 50-day moving average -- a sign that institutions were unloading the stock.

That said, the view from here argues that Hewlett-Packard has bottomed: there's more than enough legacy operation here to justify its meager P/E 5, hence the risk/reward meter is tipped toward buy.

Stock Category: Hewlett-Packard is ideal for investors who want a moderate-risk veteran with considerable upside potential. However, you have to be willing to incur a 20 percent to 30 percent decline. HPQ is not for impatient investors or those who are looking for a quick flip. There's also a 15 percent chance you'll lose your entire investment with HPQ over a 10-year period. But if you're patient, you'll see HPQ trend toward $35 in 2012.

2011 Outlook: I view Hewlett-Packard as a long-term play, but if you're looking to sell HPQ within the year, it's probably best to take your profits after it rises to $28-29, if it fails to rise above $30.

Stock Analysis: Hewlett-Packard is a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 50% position in HPQ now, and another 25 percent in one month, if the U.S./global economies do not worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my HPQ position before January 2012 and I'd put a sell/stop loss at: $13.


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Disclosure: L.C. Jacobs of New York, N.Y. reviews stocks on a quarterly, semi-annual, and annual basis.

L.C. Jacobs has no positions in stocks reviewed, but does own federal, municipal, and corporate bonds.