PC market weakness and Printing
Previously in this series, we discussed The Hewlett-Packard Company’s (HPQ) financial performance in3Q15. Among its operating segments, we’ve so far discussed Hewlett-Packard’s (commonly known as HP) Personal Systems division’s performance. HP’s Printing division reported a 9% YoY (year-over-year) decline in revenues, down to $5.1 billion in 3Q15. In constant currency, this decline was 7%.
The printing business, just like the PC market, has been badly impacted by the ever-increasing adoption of smartphones and tablets. With the arrival of cloud computing, consumers have shown a preference toward tablets and smartphones for their ease of use as an information consumption device.
In 2Q15, Gartner reported that global PC shipments fell by 9.50% to 68.4 million units on a YoY basis—the steepest PC shipment decline recorded since 3Q13. Debilitating demand and high inventory levels in anticipation of Microsoft’s Windows 10 launch led to worse-than-expected PC sales in 2Q15. Micron Technology (MU) also blamed “weakness in the PC sector” for its recent poor fiscal 3Q15 results.
In a recent report on August 26, 2015, IDC stated that global PC shipments are expected to fall by -8.7% in 2015. This situation is likely to continue through all of 2016 and is not likely to stabilize by 2017. This would mark five years of declining PC shipments.
Hardcopy peripherals market
According to a report by IDC, and as the chart above shows, HP continues to dominate the worldwide hardcopy peripherals market, with a share of about 40.8% as of 2Q15. Its market share stood at approximately 39.9% in 2Q14.
Canon (CAJ) is a distant second place in this market, with a share of about 19.5%. Epson (SEKEY), Brother (BRTHY), and Samsung (SSNLF) are other smaller players in this market. The global hardcopy peripherals market fell by 5.9% in 2Q15.
High channel inventory and weakening yen
The channel inventory of printers for supplies increased during HP’s 3Q15, indicating a slowdown in sales. Supply revenues fell by 6%. The fall in the low-end home and single function laser hardware units drove a fall in overall consumer units, which declined by 6% on a YoY basis in 3Q15.
Competitive pricing from Japanese (EWJ) players in the printing business has also posed challenges to HP’s market share in the printing space, primarily due to the weakness of the yen in comparison to the US dollar (UUP).
In the next part of this series, we’ll look further into HP’s strategy in the billion-dollar printing market.