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Why Is HP Confident about Its 4-Box Model?

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Apr. 11 2018, Updated 1:45 p.m. ET

HP’s Supplies revenue is stabilized

HP (HPQ) management had a goal to stabilize its Supplies revenue and return the Printing business to revenue growth by the end of calendar 2017. In fiscal 2017, HP expects to achieve 5%–7% revenue growth in Supplies, while Printing revenue is expected to be flat after excluding the Samsung (SSNLF) acquisition. HP’s Printing revenue rose 14% year-over-year in fiscal 1Q18 to $5.1 billion. Supplies revenue rose 10% in 1Q18.

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Confident about four-box model

HP has stated that it is confident about the predictive capabilities of its four-box model. This model began as an objective to stabilize its Supplies revenue. The first driver is to place NPV (net present value) units, while the second objective is to ensure higher usage of printer hardware units. The third objective is to focus on market share supply, and the fourth objective is to focus on product pricing, in which HP ensures an exact price point to maximize profit without impacting demand. This model has helped HP stabilize its Supplies revenue a quarter earlier than expected.

During the Morgan Stanley (MS) Technology, Media & Telecom Conference in February 2018, HP chief financial officer Cathie Lesjak stated that “you really need to work on all 4 drivers, whether it’s kind of installed base, usage, pricing or market share. You need all of them. It’s also not a single initiative that addresses all the elements of the 4-box model.”

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