By Steven Burke on November 24, 2015 on crn.com
HP Inc. CEO Dion Weisler on Tuesday said the new independent business is experiencing “weaker” than expected results for its cash cow printing business and seeing no material impact on sales in the PC business from the Windows 10 operating system transition.
Printing and PC sales were both down 14 percent in the quarter ended Oct. 31 for HP; HP Inc. launched as a separate business Nov. 1.
Weisler called the printing business a “much greater challenge” than the PC business. He said the negative impact of currency exchange rates has resulted in lower prices, with some HP OfficeJet Pro printers going into the home market, where printing usage is not as great as in the corporate market.
As a result of the difficulties, Weisler said, HP Inc. is looking at increasing and accelerating a previously announced restructuring initiative.
The turmoil in the printing market is not just impacting HP Inc. Activist investor Carl Icahn is taking a run at Xerox, which reported a $34 million loss in the most recent quarter. In addition, printer maker Lexmark International Inc. has hired Goldman Sachs to explore strategic alternatives.
“The [printer] market was somewhat weaker than we expected in the calendar third quarter, and you are seeing it in our results and you are seeing it in the results of our peers — some of whom have announced their intention to reevaluate strategic options,” said Weisler. “We do not expect the landscape to improve in the near future and we will constantly assess how the market evolves.”
With lower-than-expected printer supplies sales, HP Inc. is set to mount new initiatives to drive more ink usage, said Weisler. That includes expansion of the successful HP Inc. instant ink subscription business.
Weisler said he expects the PC business to also remain “challenged for more quarters” to come. “As expected, Windows 10 has not been a material catalyst for sales yet but continues to receive favorable reviews,” he said. “We see the most adoption in the U.S. retail segment.”
Weisler said Windows 10 remains “important for the industry” and will be a “contributing factor to support” a “future hardware” refresh cycle.
[highlight type=”one”]Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, No. 232 on the CRN 2015 Solution Provider 500, credited HP Inc. with mounting an effort to drive sales growth with innovation in new markets like 3-D printing and immersive computing with HP Sprout.[/highlight]
[highlight type=”one”]”HP Inc. is reinventing itself to get into growth markets that will offset the revenue adjustments they need to make based on market and industry changes,” he said.[/highlight]
[highlight type=”one”]As for the impact of Windows 10, Venero said adoption is limited for major corporations. “Companies are evaluating and testing and at some point, they will migrate to Windows 10,” he said. “It is not happening as quickly as one would think. The big shot in the arm from Windows 10 will come when enterprise organizations start adopting it. Right now, many businesses are still running Windows 7, which they see as suitable. Why fix something that is not broke?”[/highlight]
Weisler, for his part, said he remains confident in the outlook for HP Inc. “We firmly believe in our strategy around core growth and the future as outlined in the securities analyst meeting,” he said. “Let me remind you, we are still the leader in large consolidating markets. We have scale, innovation, channel reach and an incredible brand. While the market is challenging now, we believe the actions we are taking now will protect the core that generates the majority of our cash flow.”