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Chanos on Hewlett-Packard: Go short

July 18, 2012: 3:14 PM ET

Renowned bear investor Jim Chanos called Hewlett Packard (HPQ) "the ultimate value trap."

Chanos outlined his vision of how the inevitable death of the personal computer will affect the broader technology industry, but said Hewlett Packard was the company most precariously perched on the edge of obsolescence.

Hewlett-Packard has been hiding its research and development within its $37 billion worth of spending on acquisitions in the last few years, Chanos, president and founder of $6 billion hedge fund Kynikos Associates, told attendees at the CNBC Institutional Investor Delivering Alpha Conference Wednesday at Manhattan's Pierre Hotel.

The PC and printer company might look like a value stock by certain metrics, such as free cash flow and its price-to-equity ratio, said Chanos. He said that instead of spending on research and development, Hewlett-Packard has been acquiring companies that come with their own R&D operations.

Over the past two years, Chanos said Hewlett-Packard has spent $37 billion on acquisitions. It's a little gimmicky because the company can still build up its R&D but gets to book it as a credit rather than an expense, which is how it would be booked if the company was internally investing in R&D.

Related: Intel dodges PC slump

Chanos said Dell (DELL) also will continue to get hurt by shift away from PCs to tablets and mobile devices. Yet Dell's share price has dropped recently, and Chanos said he's "less enamored of a Dell short" that he was a few months back.

The winning companies from the death of the PC are much harder to call, he said, than the losers.

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Maureen Farrell
Maureen Farrell
Staff writer, CNNMoney

Maureen Farrell is a staff writer at CNNMoney and covers Wall Street, banking, mergers and the stock and bond markets. Prior to joining CNNMoney, she covered venture capital and entrepreneurs for Forbes, and mergers and bankruptcy for Mergermarket and Debtwire, both divisions of the Financial Times.

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