HP blames China demand and low prices for revenue drop • The Register

HP’s third quarter results 2023 are a positive one. The company claims it is making progress on long-term priorities and that structural cost reductions have been implemented, even though revenue has fallen by almost 10 percent.

The PC and Printer maker blamed a “competitive pricing environment” for keeping computing prices down, along with sluggish China demand as reasons that the market has not improved as quickly as expected.

HP’s Net Revenue for Q3 was $13.2 Billion, down 9.9 % from the same time last year, but up 2 % over the previous quarterly. Enrique Lores is the President and CEO of the company, and he claims that HP is meeting its goal to improve sequentially.

Lores claimed that HP continues to “navigate an uneven environment” with enterprise clients cautious about their spending because of the rising cost capital. Lores said that while the consumer sector remains weak, the SMB segment has shown some resilience.

HP’s regional revenue decreased by 8 per cent in the Americas, by 5 per cent in EMEA and by 9 percent in Asia-Pacific & Japan (APJ), primarily because of the weakening China demand.

“Most markets have some weakness at various levels. He said that we have seen a decline in the China market where the demand has not yet recovered to the level of the lower GDP recovery.

HP Personal Systems revenues came in at $ 8.9 billion this quarter. This is down by 11 percent from the same quarter last year, but up 9 percent over the quarter before. HP attributes this to demand for back-to school products.

HP’s Print products were down 7 percent in revenue, to $4.3 billion. This is a drop of 7 percent compared to the same time last year. The weakened Chinese demand, aggressive pricing on the consumer market, and delayed industrial spending were all blamed.

HP’s supplies revenue was “widely flat” in comparison to a year earlier, but it claimed that its “disciplined management of costs” resulted in an operating margin at 18.6 percent.

Lores said that the graphics and 3D market was impacted by “the macro-environment and delayed order cycles”, but they remain an important part of HP’s long-term plan for growth.

Lores, looking ahead, said that HP will deliver another sequential quarter of growth in Q4, though the company is lowering its expectations both for the quarter and full year.

The trend of cheaper PCs is likely to continue into the next year.

Barron’s reports that HP shares plunged sharply in early trading on Wednesday as a result of the news. But it also says that HP’s plan could be one that involves “short term pain for long term gain”, which could result in stronger future earnings and cash flows.

HP workers have bad news: the company wants to reduce costs in order to cope with the current market slowdown.

Lores told reporters that HP has set a goal to “reduce structural costs by $1.4billion” in the next fiscal year, which concludes in October. The company aims to achieve 40% of that in fiscal 2023.

HP announced, at the close of its last financial year, that $1.4 billion of cost-cutting would take place between now, and the end FY 2025. Part of this would be achieved by the layoff of between 4,000 and 6,00 staff.

Marie Myers, the CFO of HP, said that a second part of the plan centered around HP’s product lineup and reducing the number platforms it supports.

She said that at the end Q3, the company was almost halfway towards its goal to reduce the number of Personal Systems Platforms by approximately a third by the end FY ’24.

Lores stated that HP will have more information to share on its Investor Day in October, when it will disclose its plans and outlook for FY 2024.

Response to a Reg HP stated about its structural cost-reduction plans: “We outlined in November the plan for $1.4 billion in three years. These plans are helping us navigate through the current environment, while maintaining investments in our long-term growth priorities. We continue to make progress. ®