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Streamlining Its Supplies Business Remains Key Objective for HP

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Aug. 30 2016, Updated 10:04 a.m. ET

Focus on higher usage on supplies

One of Hewlett-Packard’s (HPQ) key objectives is to place hardware units with a higher usage of supplies. Driven by associated higher supplies usage, fiscal 3Q16 was the 17th consecutive quarter where HPQ gained market share in the multi-function laser printer space, which is a strategic product segment.

In June 2016, Hewlett-Packard stated that it will “harmonize” global pricing and improve margins over time in the Supplies subsegment. The company is looking to make a one-time investment to reduce the level of supplies inventory across channels over the next two quarters.

The CEO of Hewlett-Packard, Dion Weisler, noted, “We will continue to implement operational changes to our supplies inventory management in the fourth quarter and we’ll provide a further update on our Q4 earnings call.”

Hewlett-Packard expects the trajectory of the revenue from its Supplies subsegment to stabilize by 2017. The average selling price for this business rose quarter-over-quarter on a constant currency basis.

As shown above, the Print-Supplies business is a major segment for Hewlett-Packard, accounting for 24% of total revenues in fiscal 3Q16.

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Major highlights in fiscal 3Q16

Revenues rose in Hewlett-Packard’s (HPQ) Managed Print Services division on a constant currency basis. Its subscription-based supply service, Instant Ink, saw a year-over-year revenue growth in fiscal 3Q16 as well.

The Graphics division delivered another quarter of constant currency growth in fiscal 3Q16. Hewlett-Packard increased its HP Indigo manufacturing capabilities to fulfill orders and support operations in the peak holiday season.

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