HP's quarterly revenue gains 3.9% on thriving business demand

HP reported sales and profit that topped analysts' estimates on steady demand by companies upgrading computer systems.

Still, the results pointed to some potential issues ahead for the hardware company as consumer spending fell for personal computers and printers.

Fiscal second-quarter revenue increased 3.9 per cent to US$16.5 billion, Palo Alto, California-based HP said Tuesday (May 31) in a statement. Analysts, on average, projected US$16.1 billion. Most of the gains came from business demand for desktop computers. Fiscal second-quarter profit, excluding some items, was US$1.08 a share, topping estimates.

HP said Personal Systems division revenue increased 9.2 per cent to US$11.5 billion, led by commercial sales. But consumer sales declined 6 per cent and notebook units declined 23 per cent in the period, which ended Apr 30. Printing revenue declined 7 per cent to US$5 billion, with total hardware units down 23 per cent.

The consumer slowdown was particularly acute on low-end products and in Europe and China, while premium machines and gaming saw "strong demand", HP chief executive officer Enrique Lores said in an interview.

PC shipments industrywide declined 6.8 per cent in the first 3 months of the year, spurred by reduced demand, particularly for Chromebooks used by schools.

Rival PC-maker Dell Technologies reported earnings that beat analyst estimates last week. "The difference is Chromebook exposure. Dell didn't have as much Chromebook exposure - HP does," said Bloomberg Intelligence's Woo Jin Ho. HP is also more exposed to the consumer market, which may be more affected by macroeconomic concerns like inflation, Ho said.

"Despite the softer consumer, we're certainly seeing strength on commercial," said HP chief financial officer Marie Myers in an interview. "The commercial side is approximately 65 per cent of our portfolio now and I think that's a trend that's going to continue."

The shares rose about 2 per cent in extended trading after closing at US$38.84 in New York. The stock has gained 3 per cent this year, running counter to a general decline in technology shares.

SEE ALSO

Dell's sales top estimates on strong office pc growth

In March, HP acquired Poly, formerly known as Plantronics, which sells phone headsets and other audio and video accessories, in a US$3.3 billion deal to add equipment for remote work. The company expects to complete the takeover by the end of 2022, pending shareholder and regulatory approval. It's projecting annual growth for Poly of about 15 per cent in the first 3 years after the deal closes.

While components are easier to procure than last year, supply chains continue to be a barrier to meeting demand, Lores said. BLOOMBERG