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Bill Ackman Sees Too Much 'Brain Damage' in HP

Bill Ackman, founder of Pershing Square Capital Management, spoke to Bloomberg Television's Erik Schatzker last night at the Harmonie Club in New York.

Ackman said that he won't invest in HP because "it's a big, complicated mess" and that he sees too much "brain damage."

Please see highlights and a clip from the interview below. Full clip available upon request.

 

Courtesy of Bloomberg Television

 

Ackman on investing in Hewlett-Packard:

"We have gotten over the last several months probably at least five or six calls from the largest shareholders of Hewlett-Packard begging us to take a stake in the company and be a proactive shareholder. I think that what we focus on is that we try to find a business that we can predict what it's going to look like over a very long period of time. I have the fairly quaint notion that the value of anything is the present value of the cash you can take out of the business over its life."

"The problem is that HP is in a number of businesses where I think it's very difficult to predict what the business is going to look like five years from now, let alone over the many, many years of a discounted cash flow calculation you need to figure out what the business is worth. The problem you've had is that it looks cheap, but the future of the PC industry is a very difficult business to handicap. It's incredibly competitive. I think the announcement of their intention to spin part of the business off perhaps has damaged the brand and it is a big, complicated mess. One of the things I learned a lot earlier in my career is to do a calculation which I call return on invested brain damage, which is before I make an investment which requires brain damage, or a lot of work and energy, I figure out how much money I can make. The higher the brain damage, the higher the profit has to be to justify it."

"I was actually at HP yesterday for a meeting unrelated to their core business and it was just depressing walking around. The morale of the employees going from an outstanding company to one where they don't understand the direction of the business."

 

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