HP Execs Discuss Lower Supplies Revenue, A3 Market Share, More

In a third-quarter conference call held last week, HP executives discussed lower supplies revenue for the quarter, HP’s targeting of the A3 printer/MFP segment, and more. Those who participated included HP President and CEO Dion Weisler, who is leaving HP because of a family health matter, and incoming president and CEO Enrique Lores, who previously led HP’s printer group.

Weisler first noted that HP printer-group third-quarter revenue was down 5 percent year-over-year, driven by lower printer-supplies revenue. However, he noted that in the contractual market (managed print services and automatic printer-supplies programs), which includes HP’s A3 copier/MFPs, HP continues making progress.

With HP achieving 10-percent A3 market share in its second quarter, Weisler stated that HP has “now reached critical mass in this important market segment. We continue to gain traction and scale driven by the strategic decision we made to enter the A3 market and the smooth integration of Samsung printing into our portfolio.”

Weisler also noted the continuing growth of HP managed print services (MPS): “Our contractual office business and consumer Instant Ink portfolio both have gained revenue double digits in the quarter.”

More on Lower Supplies Revenue

Weisler, however, noted that HP’s printer-supplies category “remains a work in progress,” particularly in EMEA (Europe, Middle-East, Africa).

He explained that, regarding its printer-supplies business, HP continues to “strengthen our pricing discipline,” improve its channel partnerships and lower EMEA channel inventory levels in the Tier 1 and monitored Tier-2 ecosystem” as well  as change senior leadership  in EMEA, where HP particularly saw supplies revenue declines.

Incoming HP CEO Enrique Lores noted that HP’s massive installed printer and MFP continues to attract third-party toner and ink suppliers: “During the last years, we have created a very attractive profit pool of supplies that now has attracted many other companies to try to attack it and capture a portion of it without having to have a significant investment that are necessary to create a hardware installed base.”

Lores expects printer-supplies revenue to remain weak in HP’s upcoming fourth quarter, especially because of increasing lower demand in the EMEA market. For HP’s complete fiscal year, he expects supplies revenue to decline approximately 4 percent to 5 percent. He also doesn’t expect supplies revenue to grow in fiscal-year 2020.

A3 Segment

Back to the A3 copier/MFP segment, Weisler said HP will continue to systemically target this segment, which HP values at over $50 billion. Interestingly, Weisler also said that HP customers actually don’t consider A3 versus A4 as much as those in the industry do, stating: “I’ve also said on many occasions that customers don’t think about their printing in context of A3 or A4, in fact, many of them don’t even know the difference. They think about their overall printing solutions…”

He noted that in the past, HP has said it’s aiming for 12-percent A3 market share by the end of 2020. However, HP’s overall focus “has always been on building a contractual business and A3 is a key element of that strategy” and that HP isn’t fixed on achieving 12 percent at any particular time. More important is that HP “build the right distribution and partners to penetrate the contractual office” and “evolve our business model into more services and solutions.”

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