HP reports printer revenue decline

HP CEO Dion Weisler has pointed to a number of factors behind the steep declines in the company’s print revenues in the fourth quarter.

While HP was still officially one company in the quarter that ended on 31 October, ahead of the split into HP and Hewlett-Packard Enterprise (HPE) that took place on 1 November, Weisler and HPE CEO Meg Whitman shared responsibilities on yesterday’s earnings conference call for their respective businesses.

Printing sales in Q4 were down a hefty 14% to $4,96-billion, although the decline was 9% in constant currency.

While currency fluctuations are out of HP’s hands, the stronger dollar is causing HP other issues as key yen-denominated rivals such as Epson, Brother and Canon are able to lower their prices, forcing HP to follow suit.

Weisler said that this has had two knock-on effects, apart from merely the lower sales revenue generated from reduced prices.

Firstly, in a number of markets, prices have fallen to below HP’s break-even point, meaning the company has walked away from some loss-making business.

Secondly, price points for machines such as the OfficejetPro series have dropped to such an extent that they are now attracting home users – a market segment that typically prints fewer pages than business users.

“The unintended result is that we are not getting the yield per unit we would have expected on some of these units,” he noted. So it’s a double-whammy of few printer placements (and therefore less potential for future supplies sales) and less demand for ink from the installed base.

The above is in addition to a generally soft print market which itself is leading to competitive pricing pressures.

This means that HP’s bread-and-butter revenue from supplies – about 65% of total printing sales – was lower than expected in Q4, down 5% in constant currency, and Weisler now doesn’t expect supplies sales to stabilise until late 2017.

As a result, the HP CEO reiterated the commitment to making $1-billion in productivity improvements and said he may have to accelerate and increase the previously-announced restructuring actions to take out $300 million of non-revenue-generating costs over three years.

Weisler also said that HP would push its Instant Ink subscription model with programmes to increase attach rates. Incidentally, HP France gave a presentation yesterday on Instant Ink at the ADVEO World event in Paris as the OEM tries to overcome concerns from resellers that Instant Ink will drive sales out of the channel and directly to HP.

HP is not alone in facing challenges in the print market. Lexmark and Xerox have both recently said they are ‘re-evaluating their strategic options’ in the category, fuelling speculation of some M&A activity – although Weisler said yesterday that HP wouldn’t acquire any assets just for the sake of consolidation.

Yesterday’s results were not all doom and gloom. There were some bright spots in the quarter including growth in graphics and a double-digit increase in revenue from managed print services.
Nevertheless, it is set to be a tough 2016 for Weisler and his team: in addition to the issues with print, the PC market continues to face its own challenges, although HP is still taking share and new devices such as the Elite X2 hybrid laptop/tablet have been well received.

By Andy Braithwaite for OPI

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