Michael Dolan Dot Com

Tuesday, March 14th, 2006

Berstein’s Analyst: HP’s 12 Straight Quarters with “One Time” Charge = Ongoing Business Expense

http://www.theregister.co.uk/2006/03/14/hp_charges_tradition/

Wow. Berstein’s Toni Sacconaghi suggests restructuring charges at HP have become ordinary course of business after 12 straight ‘one-time’ charge quarters… wonder if there’s legal precendent on this - and how would GAAP handle it??

We believe that given the size and frequency of HPQ�€™s restructuring/workforce reduction charges, the company should look to expense them going forward as an ongoing part of doing business.

We believe that the consistency and magnitude of HP�€™s restructuring charges/workforce reductions indicates that they are more ongoing in nature than �€œone-time�€�. Moreover, expected ongoing gross margin pressure due to its portfolio mix shift makes it likely that HP will need to engage in future cost-cutting actions in order to maintain operating margins.