Can HP’s Printing Revenue Continue to Rise in Fiscal 2017?
Supplies account for 67% of printing revenue
In fiscal 2Q17 and fiscal 1Q17, the supplies subsegment accounted for 67% of HP’s (HPQ) total printing revenue as compared to 62% in fiscal 4Q16, 64% in fiscal 3Q16, and 66% in fiscal 2Q16. Last June, HP announced that it will harmonize global pricing, which will positively impact profit margins in the supplies business. HP has also worked to reduce inventory levels across channel partners.
In the last earnings call, tech (QQQ) firm HP CEO Dion Weisler stated, “Supplies sales linearity also improved, some of which we attribute to the operational changes we implemented to our sales model in the second half of fiscal 2016.” As we discussed earlier, HP is working to increase sales of PC accessories and related devices to offset a mature PC market.
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HP’s Printing segment is more profitable than its Personal Systems segment. While the Personal Systems segment accounts for 62% of total revenue, operating profit from this segment accounts for 22.8% of total profits. In comparison, the company’s supplies business accounts for 38% of total revenue and over 77% of total operating profits. HP’s printing business has an operating margin of 17.4% compared to 3.2% for its personal systems business.
HP leads the hardcopy peripherals market
As we discussed earlier, HP expects revenue from its Supplies business to stabilize by the end of 2017. In the above table, we can see that revenue in HP’s printing business fell 14% YoY in 2016, but this revenue was limited to a 2% YoY fall in fiscal 1Q17. In fiscal 2Q17, revenue rose 2% YoY to $4.7 billion.
According to research firm IDC, HP continues to lead the hardcopy peripherals market with a share of 36.1% at the end of 4Q16. Other major players include Japan’s (EWJ) Canon (CAJ), Epson, and Brother with market shares of 23.1%, 17.8%, and 5%, respectively.