HP Hires Goldman Sachs in Preparation for Investor Threat

Popular banker Goldman Sachs was hired by Hewlett-Packard (NYSE:HPQ) to defend itself against potential threats from investors and aggressive bidders who plan to break-up the organization. People close to the ongoing agreement with the financial institution informed about the deal on Wednesday.

The people with the knowledge about the ongoing talks, said HP has been left vulnerable to possible activist investor pressure when it comes to the organizations performance and strategies. Meg Whitman replacing Leo Apotheker as chief executive earlier this month also intensified the concerns of a possible takeover.

Goldman Sachs was hired by the company as an advisor, in order to help it defend against the active shareholders and bidders in the market who would want to target it. Generally companies facing such a threat introduce the “poison pills” also known as the shareholder rights plan which limits the number of shares a single investor can buy.

A spokeswoman for H-P said the company has solid relationships with numerous investment bankers. A Goldman representative declined to comment on their role in HP’s fight against potential bidders.

Goldman Sachs has a good reputation in advising companies and helping them fend off active investors and hostile bidders. Goldman Sachs has advised companies like NYSE Euronext, Yahoo and Airgas, who encountered similar investor issues earlier this year. Analysts have said that HP is lacking a direction, an instable management and also the move to restrict the portfolio of hardware and software resources has made the company an attractive target for investors and bidders.

Popular Strategy of active investors and potential bidders includes accumulation and gathering of shares of a company considered undervalued. Once the shares have been gathered they agitate the company’s board for changes resulting to a break-up.

The unexpected hiring of Ms. Whitman as the chief executive of HP has also been questioned by most of the investors and critics.  Whitman, the former head of leading online shopping site eBay Inc., was taken aboard in January. However, she has no experience running a computer software, hardware and service company, especially something as big as HP which has a market capitalization of over $46 billion.

HP’s ex-CEO, Leo Apothekar had announced last month the company’s plans to explore spinning of its PC business, nix its smart phones and Touchpad tablet business, and also announced the takeover the U.K software developer Autonomy Corp. This led to a fall in company’s stock by more than 20 percent in August. Although many private equity firms in the recent months approached HP to buy the PC business. People educated with the matter said HP will either decide to spin of the business or keep it in the company based on the value it generates.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.