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US-FUNDS-INVESTING-HEDGE:Short-seller Chanos still betting against HP, China
By Sam Forgione
NEW YORK (Reuters) - Jim Chanos, a short-seller who gained a measure of fame for anticipating the collapse of Enron, said in an interview with Reuters TV that he is still betting against the shares of Hewlett Packard and also sees problems in the retail sector.
Chanos, president and founder of the roughly $6 billion hedge fund Kynikos Associates, said that HP still suffers from past acquisitions and lack of leadership, while online consumption is stealing profits from major retailers.
"Hewlett has its own baggage due to previous management's mistakes, particularly in the acquisition front," Chanos said in an interview for the Impact Players show on Reuters.com (http://link.reuters.com/dut35t).
Chanos, who started shorting HP in 2011, said the company has failed to lead in key areas such as mobile technology and cloud computing, and that he is skeptical of its plan to recover by cutting costs.
HP said last September that it would eliminate 29,000 jobs through the end of its 2014 fiscal year. The company has also relied heavily on acquisitions that turned out to be troubled.
HP took an $8 billion writedown last year in connection with its acquisition of Electronic Data Systems Corp in 2008. Several months later, it recorded an $8.8 billion writedown related to Autonomy, alleging a massive accounting fraud at the British software company, which it acquired in late 2011.
Chanos identified Autonomy as a shorting opportunity as early as 2009, according to a source familiar with his views. His HP bet has proven prescient as the company's stock price has fallen 22.5 percent since the Autonomy deal.
Chanos told Reuters that he is betting against the entire personal computer space, which he views as a "value trap," since the stocks appear to be bargains but are headed downward.
The short-seller also said the retail sector is troubled, since more people are buying products online instead of in stores.
"I think that retail is going to be probably an area with a lot of road kill on it," Chanos said. "You don't want to be the showroom of Amazon," he said in reference to retail stores.
Chanos, whose firm, Kynikos, is named after the Greek word for "cynic," said he continues to bet against the shares of various Chinese companies, which he started doing in late 2009.
"Not a lot has changed," Chanos said. "They've got a bubble going on."
Chanos said he is betting against companies tied to Chinese construction, because the country is putting up buildings such as condominiums much faster than it can sell them, and that its debt ratios remain "staggering."
Chanos also said that the outcome of investor calls on Herbalife, a direct seller of weight-loss products that has drawn opposing bets on its shares from activist hedge fund managers Bill Ackman and Dan Loeb, will depend on whether the company's business model is valid.
"At the end of the day, the Herbalife bull-bear battle will result on who can prove in fact whether or not the business proposition is good," Chanos said (http://link.reuters.com/hut35t).
A person familiar with Chanos's hedge fund, however, said he is believed to have been shorting Herbalife shares for a while.
(Reporting by Sam Forgione; Editing by Steve Orlofsky)