HP’s Printing Supplies Business Still in Challenges

On August 20, HP reported third quarter (3Q2014) financial results for its fiscal year ending on July 31, 2014. Total revenue for the quarter was $27.6 billion, up 1% compared with the same period last year. Of this, HP Americas

contributed $12.3 billion revenue, down 1% year-over-year (YOY). EMEA supplied $10 billion, up 5% YOY, and APJ (Asia Pacific including Japan) $5.3 billion, up 1% YOY.

Printing business revenue ($5.6 billion) was down 4% YOY due to continued decline in toner supplies and weaker-than-expected ink performance. Commercial hardware revenue was $1.4 billion, flat year-over-year, and consumer hardware revenue was $529 million, down 6%. Total hardware units shipment declined 5% YOY.

In the third quarter, HP has gained share in both ink and multifunction printers. Its disciplined unit placement strategy has resulted in declines in single function monochrome and low value home printers. But it is seeing continued momentum in focus areas like managed print services (MPS), which supports a strong aftermarket sales opportunity for supplies.

According to Cathie Lesjak, EVP and CFO of HP, “We continue to see success with our new Print business models. In 2Q2014, we ran a series of promotions to move older Ink in the office products through the channel ahead of our upcoming product transition. As a result, older product sales declined in 3Q2014 and drove overall Ink sales lower in the office, year-over-year. However, we saw double digit YOY growth in our Officejet Pro X and Officejet Pro X Enterprise products and we expect the program overall to grow in fiscal 2014. Our Ink Advantage program also saw continued traction, and we once again grew unit shipments and revenue by double digits year-over-year.”

HP supplies revenue, which made up 65.5% of printing revenue, was $3.7 billion, down 5% YOY. Both ink and toner supplies has declined. HP said the decline was driven by stronger channel buy in during 3Q2013 ahead of pricing actions we took on ink, making for a tough year-over-year comparison.

CEO Meg Whitman said the company’s printing supplies business still face some challenges but it’s better prepared than ever to respond to rapidly changing business conditions. HP expects supplies to remain under pressure in the fourth quarter.

(Source: Seeking Alpha)