Dragged down by the decline in consumer personal computer (PC) demand, Hewlett-Packard (HPQ-US) announced on Tuesday (30th) that its Q3 revenue fell and missed expectations. It spread to the commercial sector, so it revised down its full-year profit outlook, and the stock price fell more than 5% after the market.
FY22 Q4 and full-year financial forecast key figures (Non-GAAP) Q4 EPS: $0.79-0.89 Full-year EPS: $4.02-4.12
Chief Executive Enrique Lores continued to be pessimistic about consumer demand this season, and even predicted that the impact would extend into the next few quarters. Notably, commercial demand, which has helped support shipment performance over the past few months, appears to be showing signs of cooling.
Lores expects commercial demand to slow from the start of the quarter, and while corporate buyers have agreed to continue deals, they are slowing the rate at which they turn deals into orders.
As a result, HP revised down its full-year EPS forecast to $4.02-4.12 from its original forecast of $4.24-4.38.
To adapt to the current environment, Lores said the company is considering adjusting variable and structural costs. As part of a three-year plan, HP hopes to cut structural costs by $1.2 billion by the end of the year, more than previously set targets to make the company stronger when market conditions improve.
After the earnings report, HP fell more than 5% in after-hours trading. The stock closed down 1.32% on Tuesday at $31.10 per share.
Q3 (as of 7/31) financial report key data vs FactSet interviewed analysts expect revenue: $14.7 billion (4.1% annual decrease) vs $15.6 billion Net income: $1.12 billion (Non-GAAP) EPS: $1.04 (yearly increase) 4%)
Departmental performance
Personal systems revenue (including PCs): $10.1 billion (3% y/y) vs $10.97 billion Printer revenue: $4.6 billion (6% y/y decrease)
The PC market is under pressure as families adjust to remote working and teaching models, which have cooled the huge demand for electronic devices during the pandemic. Data from research firm Gartner shows that this year’s Q2 global PC shipments fell by 12.6% compared with the same period last year, the largest decline in more than nine years. Among them, HP performed the worst, with a drop of more than 27% in PC shipments.
By segment, HP’s personal systems revenue fell 3 percent to $10.1 billion last quarter, dragged down by weak demand for consumer PCs. Consumer PC sales were down 20% year over year, but commercial PC sales were still up 7% year over year.
Overall, the total shipments of personal systems decreased by 25% year-on-year in the last quarter, of which notebook shipments dropped by 32%, while desktop shipments increased by 1%.
Lores said it was difficult to predict how long the slowdown in sales would last given the uncertainty in the overall economic environment, but he expected long-term demand to remain above pre-pandemic levels.
Earlier this week, HP completed its $3.3 billion acquisition of Poly. Poly is a video conferencing equipment manufacturer, mainly selling telephone headsets and other audio and video accessories. Hewlett-Packard’s previous decision to acquire it was due to the growth of the demand for remote office equipment.
