There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

April 14, 2009 - Hewlett-Packard Co. (HPQ-NYSE) provides a range of products, technologies, software, solutions, and services worldwide. The company's Enterprise Storage and Servers segment offers storage and server products in industry standard servers, business critical systems, and storage works offerings.

The company's HP Software segment provides enterprise IT management software, information management and business intelligence solutions, and open call solutions.

Its Personal Systems Group segment offers a line of personal computers (PCs) consisting of commercial PCs, consumer PCs, workstations, handheld computing devices, digital entertainment systems, calculators and other related accessories, and software and services for the commercial and consumer markets.

The company's Imaging and Printing Group segment provides consumer and commercial printer hardware, printing supplies, printing media, and scanning devices, such as inkjet and Web solutions, laserjet and enterprise solutions, graphics solutions, and printer supplies.

Its HP Financial Services segment offers leasing, financing, and utility programs; asset recovery services; and financial asset management services for enterprise customers, as well as various specialized financial services to small-and medium-sized businesses, and educational and governmental entities. The company also provides certain network infrastructure products, including Ethernet switchproducts under the ProCurve brand. Hewlett-Packard was founded in 1939 and is headquartered in Palo Alto, California.

HPQ's stock price joined the rest of the market in October and November last year and hasn't really recovered. It did rally a little through January but then the first quarter results came out (fiscal year ends in October) and the stock cracked again, taking it to a 52-week low of $25.40. It's rebounded from that depth, but can it go higher?

Sales in the first quarter (ended January 31) were down in each division except Services where revenues were up 116%, thanks to the August, 2008 purchase of EDS. But those additional revenues came at a cost. Gross margins were hurt since EDS had lower margins than H-P's other divisions. Profits were also hurt by discounts given on printer hardware and a shift in the sales mix to lower margined products in the enterprise storage and servers groups. There was also a stronger dollar. Since HP does almost 70% of its business internationally, that contributed to lower earnings.

Expect those same hindrances to continue if the global economy doesn't start improving. In fact analysts think the strong dollar alone will diminish sales by 7% to 8%.

But HP's management isn't hoping for the best. It's taking action. Staff numbers are going down. By the end of January more than a third of 24,700 employees it plans to cut because of the EDS purchase were let go. Other expenses such as travel and certain discretionary spending were also trimmed. Base pay will be cut and more performance based pay will be implemented. Another item to cut: inventories.

On the positive side: the new EDS group expands HP's range of services and should help it win more service contracts such as outsourcing. HP's ongoing revenue stream from existing service contracts is aonther positive. About one-third of all sales come from recurring revenues, giving a solid foundation for the top and bottom lines.

Earnings will grow slightly this year. The consensus of 25 analysts is for $3.70 in 2009, up from $3.62 last year. In 2010, they see $4.01. Second quarter earnings are predicted at 85 cents, down from 87 cents last year in the same quarter (earnings will be announced on May 19). Third quarter earning are set at 89 cents, a little ahead of the 86 cents made in the same period last year.

More numbers: Forward P/Eis 8.44. Trailing P/E is 10.59. Operating margin was 9.18% in the last 12 months; Profit margin was 6.78%. Return on Equity was 20.77%. There's $11.26 billion in cash for $4.70 per share. Total debt is $20.46 billion. Current ratio is 1.04. Book Value per share is $16.53. Price to book is 2.08. Beta is 1.04. There are 2.4 billion shares outstanding with a float of 2.38 billion. There's an annual dividend of 32 cents a share. Value Line rates its Financial Strength at A++.

Right now, HPQ is with the rest of the business world, hurt by an ever slowing global economy. While EDS has been a positive addition, its lower margin business is a detriment in the short run. As new contracts are won, more markets will open, and cross selling between services and products will grow. This is a solid company that is pro-active in managing, cutting costs quickly, and sits on plenty of cash. It can go shopping for quality, complementary businesses like EDS with that kind of money. For longer term investors this is a stock worth investigating.

- Company Web site: www.hp.com

- Ted Allrich