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HP’s Personal Systems Performance in 3Q15

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Sep. 24 2015, Published 2:26 p.m. ET

Double-digit decline

Previously in this series, we discussed briefly The Hewlett-Packard Company’s (HPQ) earnings performance in3Q15. Now let’s look at how Hewlett-Packard’s (commonly known as HP) operating segment, Personal Systems, performed in 3Q15.

In 3Q15, HP’s Personal Systems revenue declined by 13% to $7.5 billion on a YoY (year-over-year) basis. On a constant currency basis, this revenue decline was 7%, indicating that the strengthening of the US dollar (UUP) continued to impact this business deeply.

 

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Falling PC shipments

As we already know, in 2Q15, global PC shipments fell by 9.50% to 68.4 million units on a YoY basis, according to Gartner. Although Lenovo Group (LNVGY) retained its top position in worldwide PC shipments in 2Q15, it suffered a YoY shipment fall for the first time since 3Q13, as the above chart shows.

In 2Q15, HP held the second position on the Top 5 vendors list but also faced a shipment fall, after five consecutive quarters of PC shipment growth. Debilitating demand and high inventory levels, as customers waited for Microsoft’s (MSFT) Windows 10 launch in July 2015, led to worse-than-expected PC sales in 2Q15.

PC market sluggishness

HP’s Personal Systems division performed in accordance with the PC industry trend, as both shipments and revenue fell during 3Q15. HP reported an 11% decline in total units shipped during 3Q15, with notebooks and desktop units reporting a fall of 3% and 20%, respectively. While consumer revenues fell by 22%, commercial revenues declined by 9%, as customers deferred PC purchases in anticipation of Windows 10 launch. Usually, there’s slack in PC sales ahead of a Windows launch.

If you’re optimistic about HP, you might consider investing in the Technology Select Sector SPDR (XLK), which invests about 1.25% of its holdings in the company.

In the next part of this series, we’ll look at how HP’s Printing division fared in 3Q15.

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