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Understanding HP’s Outlook for Printing

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Nov. 20 2020, Updated 11:18 a.m. ET

Rising use of supplies

One of HP Inc.’s (HPQ) key objectives is to place hardware units with a higher usage of supplies. In fiscal 1Q17, the Supplies subsegment accounted for 67% of total printing revenue, as compared to 62% in fiscal 4Q16 and 64% in fiscal 3Q16.

In June 2016, HP stated that it will “harmonize” global pricing and improve margins over time in its 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.

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HP expects the trajectory of the revenue from its supplies subsegment to stabilize by 2017. As seen in the above table, revenue in HP’s printing business fell 14% YoY in 2016, but this revenue was limited to a 2% YoY fall in fiscal 1Q17. Now, with the supplies business stabilizing and HP’s investments in 3D printing, this business might drive revenue over the long-term.

Major players in printing

Notably, Canon (CAJ), a big HP competitor in the printing segment, reported a rise in unit sales in its laser printer business in 4Q16 (HP’s fiscal 1Q17), after a decline during the first nine months of calendar 2016. Revenue from Canon’s inkjet printer business, however, fell 11.1% YoY (year-over-year) in 4Q16. Xerox, another competitor, reported a 12% YoY fall in its equipment sales business segment in 4Q16.

According to IDC (International Data Corporation), HP led the worldwide hardcopy peripherals market with a share of 37.9% in 3Q16, as compared to 38.6% in 3Q15. Other leaders in this market include Canon, Japan’s (EWJ) Epson, Brother, and Samsung (SSNLF), with shares of 19.6%, 18.3%, 7.1%, and 3.3%, respectively.

Notably, worldwide laser printer sales fell 10.5% YoY in 4Q16, as compared to a fall of 14.6% YoY in 3Q16.

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