HP Faces Chinese Lawsuit

Renowned computer maker Hewlett-Packard Co. (HPQ) is currently facing consumer complaints from numerous Chinese consumers. Around 170 Chinese consumers have jointly appealed to the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), a Chinese agency, involved in issues related to product quality, to look into the matter relating to the supply of faulty computers by HP. 

In the complaint, the consumers have requested that the product quality regulators investigate the quality of HP notebooks and order the company to buy back or exchange allegedly faulty machines bought by the customers and also compensate them for losses. It also calls for AQSIQ to request a recall of the notebooks. 

As per the recent figures published by a non profit seeking website, Laweach, 1300 complains have been registered relating to issues such as overheating and screen malfunctioning of their notebooks. As recourse to this, HP offered an extension of warranty periods for some notebook models and urged consumers to contact the company's after-sales, who will take care of this problem. 

We believe that the company should pro actively try to address this problem, and resolve it as early as possible. This may negatively affect the company’s reputation in the International market. The company was in great touch of late and became the world’s largest computer maker, ahead of Dell Inc. (DELL) and Acer. This apart, the company made one of its largest strategic acquisitions with the takeover of 3Com Corp. (COMS) in recent times. The acquisition, valued at $2.7 billion, is expected to give HP a foothold in the networking market. 

The company delivered decent numbers over the last four reported quarters and witnessed an average earnings surprise of 1.92% in the last four reported quarters. For the upcoming quarter, the most accurate EPS estimate for HP is $1.05 a share, exactly the same as the Zacks Consensus Estimate. The lack of surprise potential coupled with the lawsuit could result in a net negative impact on the company’s price in the short term.

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