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HP Inc plunges after printer business underwhelms
November 25, 2015 / 11:50 PM / in 2 years

HP Inc plunges after printer business underwhelms

(Reuters) - Shares of HP Inc (HPQ.N), which houses former Hewlett-Packard Co’s legacy hardware business, plunged 16.3 percent on Wednesday after the company’s lacklustre results fuelled concerns about its ability to weather a slowdown in the printer and PC markets.

A Hewlett-Packard logo is seen at the company's Executive Briefing Center in Palo Alto, California January 16, 2013. REUTERS/Stephen Lam

HP Inc’s revenue from both its printer and PC businesses fell 14 percent each in the fourth quarter, their worst performance in the year ended Oct. 31, and forecast current-quarter profit below market expectations.

“Things got worse. Not only did they not get better - they got worse,” said Shebly Seyrafi, an analyst at FBN Securities.

HP Inc Chief Executive Dion Weisler called the printing business a “much greater challenge” than the PC business.

The company has been cutting printer prices to tackle stiff competition, particularly from Japanese printer makers Canon (7751.T) and Epson (6724.T).

However, the price cuts, coupled with the effect of a stronger dollar, have reduced the value of income from overseas markets.

“The unintended result is that we are not getting the yield per unit we would have expected,” Weisler said.

Revenue from HP Inc’s printer supplies such as ink cartridges and laser toner fell 10 percent this quarter. Supplies account for most of the profits for HP Inc.

HP Inc’s PC unit has been suffering as sales have been falling worldwide for several quarters and the launch of Windows 10 has so far failed to rekindle the industry.

Meg Whitman, who heads Hewlett Packard Enterprise Co (HPE.N), told CNBC on Thursday that the PC business will rebound in the next year or year-and-a-half.

Whitman, who previously headed the 76-year-old Hewlett-Packard Co, engineered the split of the faster growing corporate hardware and services businesses from the PC and printer business in October 2014.

“Ultimately I think (HP Inc), the way it’s structured, it’s going to be more of a sort of dividend yield play,” said Jeffrey Fidacaro, an analyst at Monness, Crespi, Hardt, & Co Inc.

HP Inc’s sibling, Hewlett Packard Enterprise, saw its shares rise as much as 8.5 percent on Wednesday, after it maintained its profit forecast for fiscal 2016.

Reporting by Anya George Tharakan and Sai Sachin R in Bengaluru; Editing by Anil D'Silva

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