HP shares jump after Berkshire Hathaway acquires 11.4% stake

HP shares jump after Berkshire Hathaway acquires 11.4% stake

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Shares of HP Inc. jumped more than 15% today after Berkshire Hathaway Inc. disclosed that it has acquired a 11.4% stake in the company.

Berkshire Hathaway detailed the investment in a regulatory filing released late Wednesday. The conglomerate, which is led by billionaire investor Warren Buffett, disclosed that it has purchased about 121 million HP shares. It bought the stock through a series of transactions that were carried out earlier this week. 

The shares purchased by Berkshire Hathaway were worth about $4.2 billion at HP’s Wednesday closing price. In a statement, the personal computer and printer maker said that “Berkshire Hathaway is one of the world’s most respected investors and we welcome them as an investor in HP.”

NYSE-traded Berkshire Hathaway is a conglomerate that generated more than $270 billion in revenue last year. The company has subsidiaries in a variety of industries including the insurance, retail, real estate and manufacturing sectors. Berkshire Hathaway also holds stakes in many publicly-traded firms: its stake in Apple Inc. was alone worth an estimated $161 billion at the end of 2021.

Berkshire Hathaway’s HP investment is especially notable because the conglomerate has a relatively limited presence in the technology sector outside of its Apple stake. In 2011, Berkshire Hathaway bought IBM Corp. shares worth more than $10 billion, but it later sold the stock. The conglomerate purchased more than $2 billion worth of Oracle Corp. shares in 2019 that it offloaded that same year. 

Because of Berkshire Hathaway’s strong investment track record, its decision to buy a large amount of HP shares represents a valuable vote of confidence in the PC and printer maker. HP has experienced strong growth recently thanks to increasing demand for its hardware. If its multibillion share purchase is an indicator, Berkshire Hathaway expects this growth to continue. 

HP generated sales of $17 billion last quarter, up 9% from a year ago and well above what analysts were expecting. The company makes most of its revenue from PCs and laptops. Much of HP’s remaining revenue is generated by its printer business.

HP’s printer business reported a revenue decline last quarter, but the division that includes its PC and laptop lines experienced 15% growth. Moreover, the company is experiencing even faster growth in other areas. The HP business units that make computer peripherals, hardware for video game enthusiasts and industrial 3D printers all increased sales by more than 20% last quarter.

The computer peripherals unit plays a particularly central role in HP’s plans to continue its revenue momentum. The company last month inked a $3.3 billion deal to acquire Plantronics Inc., better known as Poly, a major maker of business headsets and conference phones. HP estimates that the acquisition Poly will add $500 million to its annual revenues by its 2025 fiscal year.

HP is also working to improve profitability. In 2020, Chief Executive Officer Enrique Lores (pictured) announced a plan to significantly increase earnings per share and set a goal of achieving “gross, annualized run-rate structural cost savings” of $1.2 billion during the 2022 fiscal year. In its most recent quarter, HP posted earnings of $1.1 per share, 8 cents above what analysts polled by Refinitiv were expecting. 

Photo: HP

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