According to Gartner’s latest report, worldwide PC shipments decreased 6.9% over the year to 82.6 million units. This was the worst ever decline in the PC industry. For the entire year, PC shipments declined 10% to 315.9 million units. The global PC market was dominated by Lenovo, which registered a 6.6% growth even in the depressed market to account for 18.1% market share with 14.9 million units. HP continued to struggle with its PC shipments falling 7% globally to 13.6 million units and global market share at 16.4%. Within the US, HP maintained its lead with 26.5% market share and 4.2 million units, but registered a 10.3% decline over the year in terms of units shipped.
In their recently reported results, HP (NYSE: HPQ) saw first quarter revenues fall 1% over the year to $28.2 billion. They ended the quarter with an EPS of $0.90. The Street was looking for revenues of $27.2 billion with an EPS of $0.84.
By segment, surprisingly, revenues from Personal Systems grew 4% over the year to $8.53 billion. The growth in the segment was driven by an 8% increase in the Commercial segment which was marginally offset by 3% decline in consumer sales. Printing revenue fell 2% over the year to $5.82 billion. Enterprise Group revenues grew 1% over the year to $14.4 billion. Enterprise Services revenues fell 7% to $5.6 billion and Software revenues fell 4% to $0.9 billion. HP Financial Services fell 9% to $0.9 billion.
For the current quarter, HP projected EPS of $0.85-$0.89 compared with the market’s projections of $0.89. They expect to end the year with an EPS of $3.60-$3.75 while the Street was expecting an EPS of $3.67.
HP’s Growth Plan
HP has been realigning their operations since the appointment of Meg Whitman to the position of its CEO. They have deliberately reduced emphasis on PCs and increased their focus on high margin products like enterprise hardware and high growth segments like the phablets. Analysts believe that since her appointment, Ms. Whitman has managed to stabilize HP’s revenues by plucking “the low-hanging fruit” like the cloud. But now, she will have to prove her mettle by growing revenues henceforth.
For now, HP has their plans clearly laid out to deliver this needed growth. Unlike most other tech giants, HP plans to remain in the hardware business. They believe that their hardware is their “heritage” and software will be a component of this business. During the current year, HP plans to continue to focus on the high-growth market segments by investing in converged systems, converged storage, cloud management platform, software-defined networking, analytics, and their PC business. Also, the market was concerned about Lenovo’s entry into the server segment, but HP does not seem the least worried. While they agree that Lenovo is a strong competitor, they are convinced that both the industry and Lenovo will need time to manage the two big acquisitions Lenovo recently made – the low-end server business from IBM and Motorola Mobility from Google. HP would want to capitalize on this uncertainty to create a bigger lead in the market.
Meanwhile, HP continues to build their tablet and commercial computer product offering by releasing multiple models during the year. To cater to the growing demand of phablets in the emerging markets, they recently released two models for the Indian market. As part of offerings to the Healthcare industry, they released new tablets and PCs that provide access to electronic medical records and deliver thin client and print solutions to improve workflow so that medical practitioners can get updated information and streamline their daily tasks to focus on patient care. Within tablets, they recently announced the launch of the upgraded HP ElitePad 1000 which comes with a brighter and more durable touch screen, 16:10 screen-aspect ratio, 4G connectivity and 64-bit functionality. Similarly, they upgraded the HP ProPad 600 ,which now offers enhanced battery life, Windows 8.1, and x86 compatibility. For their commercial segment, they released HP TX1 Point-Of-Sale Solution, which is a sleek HP ProPad-based offering.
Overall, HP believes that the worst in the PC market is over and that things are headed for the better. They are preparing themselves to cater to the market’s demand of high performance mobile computing devices. Their stock is trading at $29.88 with a market capitalization of $56.98 billion. It touched a year high of $30.71 earlier this month.