HP reduces profit forecast as PC sales continue to slide

HP reported quarterly sales that missed estimates and reduced its annual profit forecast on falling demand for personal computers (PCs) and printers, especially among consumers. The shares fell in extended trading.

Fiscal third-quarter revenue fell 4.1 per cent to US$14.7 billion, the Palo Alto, California-based company said on Tuesday (Aug 30) in a statement. Analysts, on average, projected US$15.6 billion. Consumer sales in its computer division declined 20 per cent, led by cratering demand for notebooks.

HP also reduced its annual profit forecast to US$4.02 to US$4.12 a share, excluding some items, from US$4.24 to US$4.38 a share. Analysts, on average, estimated US$4.30, according to data compiled by Bloomberg.

“Like many other companies, our revenue has been impacted by worsening consumer demand that we expect is going to continue in Q4,” chief executive officer Enrique Lores said in an interview. “This situation will probably last for a couple more quarters.”

Revenue generated by the Personal Systems division - including PCs - dropped 3 per cent to US$10.1 billion in the period ended Jul 31. While sales to consumers fell, commercial revenue increased 7 per cent. Total unit shipments tumbled 25 per cent, with notebooks down 32 per cent.

HP’s higher mix of commercial PCs has served as a shield from the plunging consumer market in recent months, but Lores said the company is also starting to see a slowdown in business demand. This phenomenon contributed to the forecast reduction, Lores added.

PC demand, which boomed early in the pandemic, has fallen off as schools reopened and economic sentiment soured. Global shipments declined 13 per cent from April to June - the worst quarter in more than 9 years, according to Gartner, an industry analyst. HP experienced a drop of more than 27 per cent, the worst of any company tracked by Gartner.

In the quarter, printing revenue fell 6 per cent to US$4.6 billion, missing analyst estimates of US$4.8 billion. The segment continues to be hurt by supply-chain shortages and backlogs, Citigroup analysts Jim Suva and Asiya Merchant wrote before the earnings were released.

Profit, excluding some items, was US$1.04, one cent below estimates. The company has been focused on cutting costs in recent years, Lores said.

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The shares declined about 5 per cent in extended trading after closing at US$31.10 in New York. The stock has dropped 17 per cent this year.

Earlier this week, HP completed its US$3.3 billion deal for Poly, the company formerly known as Plantronics, which sells phone headsets and other audio and video accessories. The acquisition is a bet on the lasting demand for remote work equipment. BLOOMBERG