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HP Inc. Feels Some Pain From Slumping Printer Business

Nov 23, 2016

A little growth in personal computer sales gave HP Inc. something to cheer about in its latest quarter. But steady declines in HP’s printing business and a weak outlook for 2017 continue to worry investors.

The printing and personal computing giant said Tuesday that it had $12.5 billion in sales in its quarter ending Oct. 31, a 2% increase from the $12.2 billion during the same period last year.

The sales gain was the first time HP (hpq) reported quarter-over-quarter revenue growth since splitting from its data-center specialist sibling Hewlett Packard Enterprise (hpe) last fall. Like in its previous quarter, HP's higher sales of laptops, desktops, and other personal computer variants helped the company defy a mostly slumping PC market.

But computers only represent half of HP’s story.

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Revenue in HP’s printing business dropped 8% year-over-year to $4.6 billion. Additionally, HP said it expected to report about 35 to 38 cents per share in its current quarter compared with analysts’ projections of 38 cents per share, according to Thomson Reuters.

The weaker than expected forecast sent its shares down 2.3% to $15.58 in after-hours trading Tuesday.

The bulk of HP’s total printing business comes from selling related supplies like ink, toner, and paper. But sales of printing supplies have been falling over the past year, and in the most recent quarter, sales shrunk 12% to $2.8 billion.

During a call with analysts, HP Inc. CEO Dion Weisler said that despite the drop in printing supplies sales, he’s seeing some positive growth like an undisclosed amount of growth in the company’s so-called instant ink subscription program in which users can sign up to have ink delivered when needed. That program, he said, “is an important initiative” that he hopes will convince people to print more in their homes. Weisler said that HP is seeing “strong enrollment yet again,” without citing any specific numbers.

HP is also undertaking several marketing initiatives designed to reinvigorate its printing supply business and help “people understand why they should want to print,” said HP chief financial officer Cathie Lesjak.

But HP doesn’t expect its printing supplies business to revive overnight. Both Lesjak and Weisler said they don’t see the ink supplies unit stabilizing until the end of 2017. That’s the same projection Weisler and HP executives gave in May.

Weisler said the overall printing market continues “to be challenging” and that HP is operating under the notion that a tough market is “the new normal.”

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Regarding HP’s recent plans to buy Samsung’s printing business for $1 billion and enter the copier market with Samsung’s technology, Weisler said he expects it to close in the second half of 2017. HP plans to release new printing products in April as a result of the deal.

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