Business Management

New HP, old problems as PC market remains a bloodbath

As debut financial reports go, HP Inc.’s went, and packed cast-iron evidence that the new, hived-off company’s core markets are tough and not likely to get easier.

Revenue was down over 12% compared to a year ago when the PC, printers and accessories business constituted almost half of the former Hewlett-Packard. HP noted that the decline would only have been 5% in “constant currency terms” - that is, ignoring fluctuations.

Personal Systems sales were down by 13% (6% in constant currency) with margins at just 3.1%, underlining a fact that has been an uncomfortable truth for many years now – the personal computer market is a bloodbath for everybody but the leanest concerns or (hello Apple) highly differentiated products.

Even HP’s inner sanctum, its printer business, struggled with net revenue down 17%. Printing supplies revenue was down 14%.

In a statement, HP CEO Dion Weisler said:

“We are focused on execution, taking cost out of the business and delivering innovations that will amaze our customers and partners. Although we have some tough quarters ahead, I am confident in the future.”

It remains to be seen how far HP can reduce costs to compete with the likes of Lenovo. As for innovation, it has been a while since HP had a real breakthrough product, leaving the company uncomfortably stranded between the Chinese and other Asian low-cost makers and Apple’s citadel of creativity and fat margins.

A look at rivals doesn’t encourage either. IBM exited the PC business 11 years ago, Sony followed two years ago and reports at the time of the EMC deal suggested that Michael Dell was open to a sale of Dell’s PC business. HP itself considered that option too under Leo Apotheker’s short, unhappy reign.

In printing, one of HP’s biggest rivals, Lexmark, is exploring alternatives that could well lead to a sale while Xerox, like Hewlett-Packard and Symantec before it, has plans to split itself in two.

Where does HP go from here? The company is accelerating layoffs and seeking cost savings everywhere and it at least has done some of the hard work in reconfiguring itself for what it calls the “new normal”. It will surely need to do more to prosper though and a rare bright spot highlighted by Weisler was the EliteBook Folio laptop and the all-new, mighty morphing Elite x3 multipurpose computing and communications device, a product that shows HP still has some system engineering chops. HP is also pushing to gain more traction in high-end printing and 3D where margins should be bigger. This march to markets where products are differentiated and there is money to be made must surely represent the future ‘HP Way’.


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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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