HP Reports Decline in 1Q2013 Printing Business

HP reported that it had exceeded its earnings target for the 1st quarter of 2013, but the revenue in the company’s printer business was down compared to the same period in 2012.

Overall, HP’s total 1Q2013 revenue dropped 6% to $28.4 billion compared to the same period last year. The firm’s non-GAAP (Generally Accepted Accounting Principles) operating profit was just over $2.2 billion, down about $334 million from the nearly $2.6 billion operating profit HP accomplished in 1Q2012.

In terms of earnings per share (EPS), the firm reported a first quarter non-GAAP-diluted EPS of $0.82, which is 11 percent lower from the prior year. Though it declined compared to 2012, HP’s 1Q2013 EPS was better than the firm’s earlier guidance of $0.68 to $0.71 and it defied many analyst predictions. Ms. Whitman, CEO of HP, called the better-than-expected earnings “tangible proof that we have the right plan in place and that we’re successfully delivering on it.”

Ms. Meg Whitman, HP’s CEO, was positive about the performance of the company’s printer business. She pointed out that operating margins grew 390 basis points compared to the 1st quarter of last year and indicated that all-in-one products enjoyed a four point share gain over 1Q2012, while HP’s MFPs gained three points of market share. As revealed by Ms. Whitman, unit shipments of the new Officejet Pro X Series ink jet printer were up by 32%. She also noted that HP’s printing strategy is driving the company’s printer business to “where it needs to be.”

Ms. Lesjak, CFO of HP, shared some good news regarding HP’s printer business as well. Improved sales of higher-end inkjet machines along with stronger demand for LaserJet and inkjet cartridges helped increase the firm’s overall gross margins. She said HP continues to realize share gains in high-value ink hardware and that higher-value multifunction laser machines are “doing well for us.” She added that HP’s Indigo digital press had a “strong quarter” and that the company was experiencing “strong customer interest” for its new high-speed, desktop inkjet Officejet Pro X Series released in February.

Despite the optimistic assessments from HP’s CEO and CFO, the company’s printer business was down. The printer unit’s total 1Q2013 revenue of $5.93 billion was off 5.3% compared to 1Q2012. Shipments of consumer hardware were down 13% and commercial hardware shipments dropped 6%. Compared to last year, total hardware shipments were down 11%, while sales of consumables slipped from about $4.1 billion to $3.9 billion, a decline of about 5 %.

The flat-to-declining revenue generated by HP’s printer and consumables sales is yet more to worry about. Total printer and supplies revenue remained largely flat last year and declined in the 1st quarter of 2013. In Q12013, total revenue from HP’s printer and supplies sales was down to levels not witnessed since its worst year in 2009.

Ms. Whitman commented, “With the first quarter of 2013 behind us, we’re starting to see some traction in our performance as a result of the actions we took in 2012 to lay the foundation for HP”s future.” She allowed that the firm did not perform as well as expected but emphasized that the company did “better than we expected.” Ms. Whitman was quick to warn, however, “HP’s turnaround will not be linear and our primary focus is to deliver on our outlook for the full year.”

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