Hewlett-Packard

Welcome back to the LMHS Invest Club blog! Today's company reigned supreme for over half a decade in the computing world, but has recently fallen off the throne and is no longer the top distributor of personal computers. Yes, Hewlett Packard (HPQ) is our company of the day. It was established in 1947, and is now headed by CEO Margaret Whitman. As we will soon reveal, HP was the leader in the PC industry for almost half a decade, but was surpassed recently by Lenovo. Why is HP breaking down like this? Let's take a look. Like the other companies we observe, HP experienced stunning growth in 1999 but plummeted thereafter by 2002 (we will talk about this very soon!). This tech company turned to a path of consistent growth in late 2005, maintaining it until the 2008 recession - HP was on the top of the world, and was the largest producer and distributor of personal computers. Since 2010, Hewlett-Packard has slowly been dwindling down, off the throne, and far from the top of the industry. Since reaching nearly $60 in 2010, HP rests not even at a quarter of that amount now. Considering the recent plummet, we can almost already conclude HP is a lost investment. Over a month ago, in early October, the company forecasted revenues a staggering 15% below the previous fiscal year. This vicious cycle can only hurt HP - less investing, less stimulation of growth, less internal spending for improvement, fewer sales, less revenue, and the cycle repeats. Unless the public or private investors put more money into the company, the cycle will continue and HP will eventually fall apart. Our best suggestion would be for the company to either split or shut down the personal computing division, which hosts the majority of yearly deficit. Simply put, HP better improve their computers or Lenovo and others will push them in the dust.

Microsoft

Happy Friday to all our readers! We welcome you back to Tech Month, and are bringing to you today one of the biggest players in the software industry, Microsoft (MSFT). This tech giant we have known since 1981, founded by Bill Gates and Paul Allen, focuses on software, operating systems, as well as gaming. The current CEO, however, is Steven Ballmer. The most widespread Microsoft product is the Windows OS. The first system, the "MD-DOS" ran on an IBM computer, and followed soon thereafter with Windows 1.0. Now, the company's most recent OS is Windows 8, designed with emphasis on the most modern technologies, especially tablets. Now, for the stocks. Like other companies, Microsoft experienced steady growth in the 80s and 90s until 1999, when it drastically surged to around $60 a share. Since then, shares have unfortunately remained stagnant in the $25-35 zone. We expected more growth considering the evolution from Windows 98, ME, XP, Vista, and 7, now with the spreading Windows 8. With these first statistics, we do not expect significant growth with the new OS, and October's results provide us congruent information. Windows predicted huge numbers with the release of Windows 8; remember that most PC users use Windows (half the blog readers, just a small sample of all the users worldwide, use Windows). Upon hearing these news, we were excited; we looked forward to seeing upwards development, but unfortunately saw a complete foil. Earnings per Share (EPS) instead fell 20% in mid-October. EPS describes the amount of money expected to be gained or lost on each individual share over a specific period of time, often a quarter (QT) or Fiscal Year (FY). That same month, however, Microsoft announced that their new Windows 8 platform would expand beyond only Nokia phones. Although the Nokia Lumia is increasingly popular, and a well-needed comeback for the company, Microsoft has plans to seek other phone manufacturers, including HTC and its own Windows Phone. Now, for our verdict: we believe Microsoft is heading on the right path but it is not yet a safe bet for investment. Considering the longevity of the stagnancy hovering over Microsoft on the market, investing will be prime when the Surface with Windows 8 Pro is released. Our simulated investments turned a loss as well, as we bought shares at $29.64 and they now sit at $28.81.

Sony

Welcome back to Tech Month! The next company we are discussing focuses on televisions, cameras, video equipment, and gaming hardware - PlayStation. That's right, today we are talking about Sony (SNE). Sony was established in 1946 and is currently headed by the CEO, Kazuo Hirai. This is an interesting company on the Stock Market, as it has failed to experienced significant growth in the long term, adding to the fairly continuous decline in share price since 2001. Unfortunately, Sony never fully recuperated from the 2008 global recession and remains at levels about a fifth of those in 2007. When we look at the month of October, we see an imbalance marked by little room for growth. However, the release of updated products advise an increase in revenue over the coming weeks. The main product of October, the PS3 Slim to be precise, already show signs of gain. The PS3 Slim, as inferred from the title, is the original PS3 but in a slimmer and sleeker body, with sales already surpassing expectations. If Sony keeps up these sales, and continues to produce high-quality products (perhaps a PS4 or the like) in gaming hardware, the company would certainly place itself on the right track to popularity on the market. In mid-October, Sony announced plans for a new convertible (tech, not car). For those of you unfamiliar with the device, a convertible is a tablet with a detachable/attachable hard keyboard. This is a great option for users that want to convert to a tablet, but still want to have the laptop and desktop feel - one of the best transitions. These plans, are we expected, provided sustained growth for the company until the end of the month. A few days later, Sony announced new plans for worker benefits in Japan with the implementation of early retirement. This is something surrounding Japan only, and had no legitimate consequence on the global market, despite the decrease in share price. Unfortunately, we do not predict a healthy future. Considering our simulated investments on Investopedia, we bought fifteen shares a few weeks ago priced at $11.93. The market closed today with Sony at $10.90. The Japanese market, however, experienced a minor collapse with new problems with the Japanese Yen just today. We believe these problems will fade soon, but still do not expect a reliable Sony over the next few months.

European Sovereign-Debt Crisis: The End of the Euro?

      Welcome back, everyone! We hope everyone had a smooth transition out of Daylight Savings Time earlier today.

      As 2012 draws nearer and nearer to a close, our worldwide sensibilities will recognize the conflicts arising in the European economic market. Such is the severity of this recent downturn that many question the persistence of the Euro as a common currency in the near future. As congruent with any major crisis, one naturally must wonder as to why Greece's banks have failed so miserably or why Spain's unemployment rate skyrockets into economic monstrosity. The answer to this question lies in a fundamental aspect of the European market: government debt.

     This crisis, known officially as the European sovereign-debt crisis, arose in late 2009 as a result of the global recession of 2008. As banks around the world pleaded for government bailouts, private debts translated into government debts as the housing and property bubble "burst;" this proved especially significant in Greece, where the entire private sector experienced a collapse. A requested bailout was produced by Germany, ameliorating the Greek structural deficit (whilst simultaneously worsening the recession by inciting spending cuts); despite this, a decline in investor confidence sharply crippled Greek credit. Thus, these factors combined with the resultant political and social unrest have led many to speculate that Greece must eventually leave the Eurozone.

     A similar phenomenon has recently developed in Spain. Before 2010, Spain maintained a relatively low public debt level in comparison to GDP. However, deficits rose by 2011 as a result of the European bailouts. This rise in national debt experienced a snowball effect in early 2012 as interest on Spanish bonds reached 7%. Several austerity measures and a plan for bank recapitalization have been put into place, but Spain's precarious economic condition remains a vital topic of interest.
    
    As one may observe, the recent financial crisis in the Eurozone can be classified as a "crisis of confidence." The precise ramifications of this difficult situation are unclear, as adjustments in creditor-investor relationships remain murky. One can, however, foresee a definite schism of the European commercial alliance as variations in work ethic and economic austerity become all too important.

-Chris Cattafi, Investment Club, Co-Founder and Vice President

Intel

Welcome back to the Invest Club blog! Today's company is Intel (INTC). Intel is a tech company that focuses on digital platforms and processes, and produces chips such as the currently popular i3, i5, and i7. Intel was established in 1968 and is currently headed by Paul Otellini. This company drives further the advancements in computing by producing smaller, faster, and more efficient hardware for desktops, laptops, mobile phones, and tablets alike. Intel saw slight growth on the Stock Market until 1999-2001 when it experienced a tremendous surge upwards followed by a sharp decrease by 75% from the previous year in 2002. If you have been reading some of the other posts on this blog, you may have noticed a continuing trend with most companies we evaluate - this 1999-2001 scenario affects everyone, but not to worry, we are covering this topic tomorrow! We will find out what exactly happened and why everything changed suddenly. Back to Intel: we analyzed the last few weeks on the market and found some interesting figures. On October 8th, Intel announced plans to lay off 7100 employees. Stocks that day opened $0.40 lower than the previous day's close. Just a week later, Intel released its 3rd Quarter Income Statement, which showed profits that surpassed expectations, but that were unfortunately still below original predictions and a whooping 5% lower than than last FY's 3D. It is fair to say that Intel is not headed on the brightest path with such results. Further, analysts expect Intel to lose even more revenue due to the laptop to tablet transition, still a jejune world to this company. We advised our members on Tuesday to avoid investment in Intel, considering the disappointing income statement and the inability to stay on schedule with the growing technological world, and our simulated investments back our predictions. We purchased shares priced at $22.62, which closed on Friday with a price of $22.06. Intel simply is not in a state that is optimal for investing, and, in our point of view, we would set a 'neutral' status.
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