Slow Second Quarter for HP Inc., but Remains ‘Committed to PCs and Printing’

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HP Inc. reported results for its second quarter of 2016 that ended on April 30th, with net revenue of $11.6 billion, down 11 percent versus second-quarter 2015, and net earnings per share (EPS) of $0.38, down from $0.40 for second-quarter 2015, but within HP’s previously provided outlook of $0.33 to $0.38. Net earnings for the second quarter totaled $629 million, down 11 percent versus $1,011 million for second-quarter 2015.

Second quarter non-GAAP (Generally Accepted Accounting Principles) net EPS was $0.41, up from $0.39 in the prior-year period, and above HP Inc.’s previously provided outlook of $0.35 to $0.40.

“This quarter we delivered strong results and solid progress towards our long-term strategy,” said Dion Weisler, HP Inc.’s President and CEO. “We achieved our operational objectives, unleashed truly amazing innovations, and grew in strategic areas of our business, despite tough market conditions.”

Weisler also noted that HP Inc. is “on track” to reduce its cost structure by more than $1 billion in 2016, with a “reduction of approximately 1,200 headcount year-to-date,” with 3,000 more layoffs planned by the end of the year, according to HP CFO Cathie Lesjak.

“Committed to PC and Printing Portfolios”

In an HP Inc. conference call, HP Inc.’s Lesjak, responding to a question of whether HP is considering any spin-offs or mergers, noted: “As far as our major franchises go, (we are) very committed to both PC and printing portfolios.”

Within the $11.6 billion in net revenue HP Inc. reported for its second quarter, 60 percent of that consisted of PC revenue, and 40 percent consisted of printing group. Print-supplies revenue accounted for 27 percent of revenue; 33 percent consisted of notebook PC revenue; 21 percent consisted of desktop PC revenue; 6 percent consisted of PC workstation revenue; and 13 percent consisted of printing-related revenue.

Printing Group

HP Inc.’s Printing group net revenue was down 16 percent year-over-year, with a 17.3 percent operating margin. Total hardware units shipments were down 16 percent, with Commercial hardware units down 12 percent, and Consumer hardware units down 18 percent. Supplies revenue was down 16 percent.

Within the Printing Group, HP states that:

  • Its supplies-revenue trajectory is “still on track” to stabilize by end of the end of fiscal-year 2017.
  • Average selling price was up sequentially and year-over-year in constant currency.
  • HP gained 2 points of market share sequentially in both laser and inkjet printer/MFP hardware segment according to research from market-research firm International Data Corporation (IDC).
  • Constant-currency growth in graphics-printing for the 11th consecutive quarter.
  • Managed Print Services revenue was up in constant currency year-over-year.
  • Instant Ink program enrollees continued to grow sequentially.
  • Channel inventory for hardware and supplies are within targeted ranges

Personal Systems (PCs) Group Results

Personal Systems’ net revenue was down 10 percent year-over-year. Commercial PC net revenue declined 7 percent, while Consumer PC net revenue declined 16 percent. Total unit shipments were down 9 percent, with Notebooks units down 6 percent and Desktops units down 10 percent.

Outlook

For its third quarter, HP estimates non-GAAP net EPS from continuing operations to be in the range of $0.37 to $0.40, and GAAP net EPS from continuing operations to be in the range of $0.34 to $0.37. Fiscal 2016 third-quarter non-GAAP diluted net EPS from continuing operations estimates exclude $0.03 per diluted share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits, and tax-indemnification amounts.

For fiscal 2016, HP estimates non-GAAP diluted net EPS from continuing operations to be in the range of $1.59 to $1.65, and GAAP diluted net EPS from continuing operations to be in the range of $1.52 to $1.58. Fiscal 2016 non-GAAP diluted net EPS from continuing operations estimates exclude $0.07 per diluted share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits, and tax indemnification amounts.

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