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Weak Q1 Printer Supply Revenues Pulled Down HP’s Printing Segment

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Printing business performance

HP’s (HPQ) printing business was doing well after HP along with Hewlett Packard Enterprise (HPE) were split from parent company Hewlett-Packard Company in 2015. HP’s acquisition of Samsung Electronics’ (SSNLF) printer business also helped the company to expand its share in the A3 printing space and streamline its printing business. However, the printing business revenue growth on a YoY basis has been declining in the past four quarters.

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In the first quarter of fiscal 2019, HP’s printing revenue was slightly down by 0.3% YoY to $5.06 billion, while it fell 0.7% YoY on a constant currency basis. Printing revenues were also down from the Wall Street estimates of $5.19 billion. Total hardware units increased 3% driven by a 4% increase in commercial hardware units and a 2% increase in consumer hardware units. Supplies net revenue also declined 3% YoY in Q1 2019. Currency did not impact the supplies in Q1.

Weak supplies 

HP’s high-margin printer supplies revenue remained sluggish in the quarter especially in the EMEA (Europe, the Middle East, and Africa) region where supplies declined 9%. The company expects the HP printer supplies revenue to remain weak and decline around 3% throughout 2019 due to soft demand in the EMEA region.

The supplies business is affected by four factors, including store base, usage, share, and price. A decline in share, as well as pricing, led to a fall in printing revenues in the quarter. Notably, demand for store supplies fell in the quarter as more commercial customers started buying supplies online, where HP has a lower market share.

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