HP Inc. to Focus on ‘Ink in the Office,’ A3 MFP/Copier Market, 3D Printing, Graphics, MPS
As Hewlett-Packard prepares to split into two companies on November 1, 2015, HP Inc. (which will be devoted to personal computing and printing), and HP Enterprise (which will be devoted to enterprise software and hardware), management for HP Inc. provided some key details on the strategies for HP Inc. at a 2015 Securities Analysts Meeting, including a focus on the A3 copier/MFP market, managed print services, and 3D printing.
Dion Weisler, who will become president and CEO for HP Inc., noted, “I am honored to be leading this company at an exciting time. We’re building a company with the heart and energy of a startup and the brains and muscle of a Fortune 100 corporation.”
Weisler laid out the strategy for how HP Inc. will maintain its leading position in Printing and Personal Systems, and outlined the factors that he says make the new company a compelling investment opportunity. In particular, HP Inc. has:
- A focus on growing profitable share.
- Recurring profit streams and strong cash flows.
- Meticulous focus on cost and operating efficiencies.
- Prudent capital allocation and commitment to shareholder returns.
- Commitment to investing for the future.
“Executing on our strategy will produce reliable returns and cash flows while also having the opportunity for long-term growth,” Weisler said. “The separation enables us to focus our company assets and financial resources on our core businesses, growth opportunities, and (the) future, while also being very disciplined about delivering long-term, shareholder value.”
Weisler then went on to acknowledge the challenging market environment and currency headwinds, but emphasized that HP Inc.’s business fundamentals are strong. He outlined pockets of growth and new markets that HP Inc. will pursue to drive growth, including graphics, the A3 copier/MFP market, commercial mobility, and 3D printing.
Fiscal 2016 Outlook
HP’s Cathie Lesjak, who will become chief financial officer for HP Inc., provided the financial outlook for the new company in fiscal 2016. Lesjak acknowledged that “markets are likely to remain tough for the next several quarters with continued competitive pricing in printing and soft demand in PCs.” To offset these challenges, Lesjak says HP Inc.’s strategy will be to protect its core business while focusing on accelerating in key areas, including business printing, graphics, commercial mobility, and services.
HP Inc. expects to return 50 to 75 percent of annual free cash flow to shareholders through a combination of a robust dividend and regular share buy-backs. In fiscal 2016, the company indicated that it expects to be at the higher end of that range, with approximately $865 million returned through dividends, and the balance returned to shareholders through share repurchases.
For HP Inc., HP is forecasting:
- A non-GAAP (Generally Accepted Accounting Principles) diluted earnings per share (EPS) outlook for fiscal 2016 of $1.67 to $1.77, and GAAP diluted EPS for fiscal 2016 of $1.55 to $1.65. Fiscal 2016 non-GAAP diluted EPS estimates exclude after-tax costs primarily related to restructuring and the separation of HP into two companies.
- Estimated fiscal 2016 free-cash flow of $2.5 to $2.8 billion.
- Expected return of up to 75 percent of fiscal 2016 annual free-cash flow to shareholders through dividends and share repurchases.
HP Inc. will trade under the ticker symbol HPQ on the New York Stock Exchange.
HP Inc. Business-Segment Strategies
Also at the investors’ conference, the future HP Inc. management team laid out strategies for the company’s business segments, including:
- Enrique Lores, who will become president of the Printing Business, provided details on a strategy that he says will ensure HP maintains its role as the world’s leader in printing. Acknowledging market and competitive headwinds, Lores emphasized that printing remains a massive market, currently $234 billion and growing. Echoing Weisler’s earlier comments, Lores is optimistic that as a separate company, the Printing Business in particular will successfully drive HP’s all-important supplies revenue.
- Lores also highlighted several HP initiatives, including:
- Ink in the Office, which is one of the fastest growing Web-based services.
- Expansion into the A3 copier/MFP market where Lores says HP Inc. has an opportunity to significantly grow its market share.
- Graphics, which has been a leading growth business for HP overall.
- Managed print services, where the shift in customer behavior from transactional to contractual presents HP with an opportunity to increase penetration in supplies.
- Stephen Nigro, who will lead HP Inc.’s 3D Printing Business, outlined the opportunity the company sees in 3D printing with its MultiJet Fusion technology. HP plans to launch its first 3D printer during 2016, and says this 3D printer will focus on addressing customer challenges around speed, quality, and cost. Nigro also outlined how HP Inc. plans to leverage its existing PageWide technology to disrupt the traditional manufacturing market.
- Ron Coughlin, who will be president of HP Inc.’s Personal Systems Business, gave an overview of how the Personal Systems gropu plans to deliver profitable growth moving forward. Leveraging HP’s leading market position, “powerful pipeline of innovation” and ability to execute regardless of the market environment, Coughlin said the new HP Inc. will focus on the commercial PC market and attractive consumer segments.
- The addressable market for Personal Systems is approximately $340 billion, and while Coughlin acknowledged near-term market headwinds are expected to last several quarters, he identified several opportunities that he says will propel the Personal Systems Business, including:
- Clear and systematic market segmentation to identify areas where HP Inc. is under-penetrated.
- A cost focus coupled with “great design and innovation” to address the Commercial market.
- New form factors, such as convertibles, that complement HP’s existing line-up/
- Expanding into Commercial Mobility solutions and services such as “PC-as-a-Service”.
- New category-creation such as Immersive Computing, where HP says its new Sprout product has already generated significant interest.
Reuters news service also reported that HP expects to cut about 33,300 jobs over the next three years. These job cuts are in addition to the 55,000 layoffs previously announced under HP CEO Meg Whitman, and will mostly be in Hewlett Packard Enterprise, with up to 3,300 job cuts planned for HP Inc.
- September 2015: HP Creating New 3D-Printing Group to Be Led by Steven Nigro
- August 2015: Sluggish Quarter for HP as Split into Two Companies Approaches
- August 2015: Memjet Files Patent-Infringement Lawsuit Against HP, Claims HP Infringed on Page-Wide Printing Patents
- August 2015: HP Announces New Board of Directors for HP Inc. & HP Enterprise
- July 2015: HP: More than Half-a- Million Customers Subscribing to its Instant Ink Ink-Cartridge Subscription Program
- July 2015: HP Takes ‘Important Step’ in November Company Split with SEC Filing
- July 2015: HP Ventures Investing in Shapeways, a 3D-Printing Service Provider