Moody's: Hewlett-Packard unchanged

Moody's Investors Service said that Hewlett-Packard Co.'s senior unsecured debt rating of A2 and prime-1 short-term rating and stable outlook will not be affected by news that the company plans to acquire Palm Inc. for about $1.2 billion in cash.

The transaction has been approved by both boards of directors and is expected to close in July.

While the strategic decision to enter the smart phone and adjacent markets is notable in that it opens up an $80 billion market to Hewlett-Packard, Moody's said the financial impact of the acquisition is not material to its financial profile.

Through the 12 months that ended February 2010, Palm generated revenue of $583 million and $124 million of negative cash flow, the agency said.

By contrast, Hewlett-Packard's revenue and free cash flow for the 12 months that ended January 2010 were $117 billion, $11 billion and cash balances were $13.6 billion, Moody's said.

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