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,Declining market share AND margins suggests broad-based lack of competitiveness.(I chose to benchmark against Dell in order to put things in perspective.)Balance Sheet Analysis:HP's balance sheet has been deteriorating over the past couple of years.The company's dwindling cash and mounting debt are worrisome, and comes at a time when the company needs financial flexibility the most.To put it into perspective, HP's market cap is 1.6 times that of Dell's, but HP only has half as much cash.Does HP have the firepower to effectively compete at this crucial juncture? (Not to mention cash/share offers downside protection.)Cash Flow AnalysisAlthough Net Income has been declining, we see that Free Cash Flow improved in FY11, but dropped dramatically in 1Q12.
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,The healthy marketing strategy, which propelled the company over the past seven years, is now problematic.CMG caters to a sector of the market that is less likely to eat fast food.The E.coli problems facing the chain are likely to result in a large percentage of customers staying away in the future.The recent cover story in the December 28 issue of Bloomberg Business Week features a picture of a vomiting burrito.The market handsomely rewarded the "healthy" marketing strategy that expanded the addressable market for fast food.However, given the spread of the E.The price to earnings ratio of the company was at 29.76, reflecting the huge growth over past years.
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