HP and a strong US dollar
HP’s (HPQ) revenue has been impacted due to currency fluctuations since it generates a substantial portion of revenue from international markets. It has increased its products’ ASP (average selling price) due to an increase in commodity prices and a strong US dollar (UUP). Its product prices are expected to decline if the US dollar depreciates in the future.
Earlier in this series, we saw that ASP in the United Kingdom increased significantly for PC manufacturers, including Apple (AAPL), Dell, and Microsoft (MSFT), driven by the depreciation of the British pound, a fallout of the Brexit. HP’s Japanese competitors in the printing space have had a weak yen over the last two years. That has enabled domestic companies in Japan to have an aggressive price point for most products.
While the British pound (FXB) has appreciated in the last month, it depreciated against the US dollar in the week ended September 22, 2017. The pound posted a weekly close of 1.4, depreciating 0.74% against the US dollar, which was the first weekly fall for the British pound in five weeks.
To fight off cheaper product substitutes, HP has focused on product innovation. It believes that consumers and companies will continue to buy products if it can improve serviceability and security parameters.
How did currency impact HP’s revenue in fiscal 3Q17?
HP’s revenue from its Personal Systems business rose 12.0% YoY (year-over-year) in fiscal 3Q17 and 13.0% YoY on a constant currency basis. Similarly, revenue from its Printing segment rose 6.0% YoY and 7.0% on a constant currency basis in the quarter ended July 2017.