By Steven Burke on May 24,2017 on CRN.com
HP CEO Dion Weisler Wednesday said the company is “out-executing” competitors resulting in “breakthrough” quarterly results that mark the first time in six years HP has seen both printer and personal systems sales growth in the same quarter.
“We are out executing the market,” Weisler told CRN in an interview after the company delivered better-than-expected results, with 10 percent growth in the PC business and 2 percent growth in the printer business. “We are doing that playing our own game. We are segmenting the market, figuring out where we want to win, and how we are going to win, and how we are going to do that together with the channel.”
Overall HP reported adjusted earnings of 40 cents per share on a 7 percent increase in sales to $12.4 billion for its second fiscal quarter ended April 30. Wall Street analysts were expecting adjusted earnings of 39 cents per share on sales of $11.96 billion, according to Thomson Reuters.
As a result of the “breakthrough” results, HP raised its earnings guidance for the current fiscal year to a range of $1.59 to $1.66 per share, up from a prior range of $1.55 to $1.65.
HP shares were up $0.58 (3.0%) to $19.59 in after-hours trading.
Weisler told analysts that his confidence is increasing quarter after quarter as the company “embraces” change and turns it into opportunity. “It was a breakthrough quarter for us delivering growth in both segments – printing and personal systems – the first time since fiscal year 2010,” he said. “We are taking profitable share. We are out executing our competitors and delivering some of the best innovation this company has ever seen.”
HP’s personal systems business was up 10 percent for the quarter with sales of $7.66 billion compared with $6.99 billion in the year-ago quarter.
The bigger surprise was the printing business which was up 2 percent to $4.74 billion compared with $4.63 billion in the year-ago quarter. With all important printing supplies growth of 2 percent in the quarter, the operating margin in the printing business was 17.4 percent, up from 16 percent in the preceding quarter.
“The print business hit it out of the park on every single dimension,” said Weisler. “Overall revenue was up 2 percent but hardware revenue was up 7 percent, supplies revenue was up 2 percent. It has been a long time since we have had supplies revenue up … Market share was up. Operating profit was up. It was kind of Up! Up! Up! Up! Up! The channel plays a big role in that.”
With security threats like WannaCry ransomware dominating the news, HP’s no holds barred security innovation is providing the company with a major competitive advantage, said Weisler. “We have seen in the news in the last few weeks the damage that is caused by not having up-to-date hardware,” he said. “We have the best defense possible in PCs – below the operating system, at the operating system, and above the operating system. We mirror that inside our printing platform as well.”
HP Americas President Christoph Schell told CRN that HP’s highest tier platinum-level partners were strong performers in the quarter. He said overall they are delivering sales growth 3 percent above the high sales targets set by HP. “That is huge,” he said. “These programs are not designed to be met.”
Schell said he sees partners in the current quarter taking an aggressive posture with HP’s just-released A3 copier replacement product. That A3 portfolio, which began shipping last month, is aimed at displacing copier giants Xerox and Ricoh with a highly disruptive product line. “This coming quarter is really all about A3 and making sure we scale that product,” he said. “There are some great opportunities in the pipeline.”
HP partners, for their part, said HP’s innovation in both PCs and printers is paying off in strong sales growth.
Harry Zarek, CEO of Compugen, one of HP’s top partners and No. 67 on the 2016 CRN Solution Provider 500, said HP is winning the “hearts and minds” of customers with a stellar product portfolio. Compugen is seeing strong double-digit sales growth in its HP business, he said.
The security innovation and device-as-a-service momentum have positioned HP well for the future, said Zarek. With WannaCry and other threats, HP has “carved out a unique” position with its security innovation in both printers and PCs, he said.
“This is the first time I have ever heard any OEM focus on how they can make PCs more secure,” he said. “The ransomware that has been happening in the last few weeks really emphasizes the importance of making sure PCs and printers are secure. HP has a strong sensibility around what customers are looking for.”
Zarek said he is excited to see HP’s “success” in the printer market especially as the A3 portfolio hits the market. “We are looking forward to adding HP as part of our A3 portfolio,” he said.Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 167 on the 2016 CRN Solution Provider 500, said the HP 10 percent sales growth in the personal systems business proves that the “PC market is not dead.” “The PC is alive and kicking,” said Venero. “That pane of glass on the PC that gives workers access to all of the tools and solutions needed to operate is more important than it has ever been. The PC will never die.” Venero said he just met with a top customer recently who was looking at PC as mere overhead, but when Future Tech mapped out all of the critical tools and support systems that the PC was providing the business the customer quickly changed their view. “At the end of the day it runs up to a single pane of glass which is a PC or a notebook,” Venero said. “We applaud HP’s growth. Our HP business is very strong. They are doing a good job focusing on the customer and providing innovative products.”