Read Zacks_Analysts' blog in RSS
June 11, 2010
Share This
The world’s largest computer maker, Hewlett-Packard Company (HPQ) is facing a lawsuit filed by New Jersey-based Turbon International Inc. Turbon has accused Hewlett-Packardof fraudulently inducing it to part with trade secrets related to the manufacture of replacement laser printer cartridges, thereby putting Turbon’s existence at stake.
Turbon stated in filings to the Manhattan Federal court that Hewlett-Packard had promised it some high value contracts in 2008. However, after awarding a few orders under the agreement, Hewlett-Packarddecided to drop these plans and stopped placing orders on the company. As per the lawsuit, the computing major unethically extracted Turbon’s trade secrets and then, disregarded the contract, from then on encouraging end customers to recycle their empty cartridges. Turbon believes that if these practices were continued, it would have a detrimental impact on its business and the replacement cartridge manufacturing industry as a whole.
We believe that while the whole issue is sub judice, if proved correct in a court of law, it would tarnish the image of the computing major. This apart, Turbon has demanded hefty compensation, including damages for fraudulent inducement, misappropriation of trade secrets and unfair competition. It is also seeking a ban on the technologies to be used by Hewlett-Packard.
The company currently holds the leading position in both the PC and server segments. Hewlett-Packardhas already strengthened its networking line of business by grabbing another networking company 3Com Corporation (COMS).
H-P has also been strengthening its printing business through the roll out of new printing models. Some of these are quite innovative, facilitating printing of materials directly from smartphones and other wireless devices through the cloud. At this point, a lawsuit involving its printing business could temporarily pressure the shares.
We have a Neutral recommendation on Hewlett-Packard shares.
Read the full analyst report on "HPQ"
Zacks Investment Research