Local manufacturing strengths, new form factors, software-driven hardware, and service-backed products could help the company press a new button in business growth.
It was not exactly a great year for desktop and laptop businesses. Notebooks declined by 40.8 percent YoY, the consumer segment dipped by 36.1 percent YoY and the commercial segment declined by 25.1 percent YoY (As per IDC). A muted and delayed procurement scenario by enterprises and SMEs also led to a decline in the commercial segment. Shipments in the India PC went down as much as 35 percent year-over-year in Q1 2023 to 3.9 million units, notebook shipments saw a nosedive of 41 percent, desktop shipments slipped by seven percent and tablet shipments went down by 37 percent (As per Canalys).
Enrique Lores, HP President, and CEO.
“We are well-positioned to win in our markets and drive long-term sustainable growth as we make continued progress against our Future Ready plan. Our disciplined execution and strong innovation in a tough macro environment allowed us to deliver non-GAAP EPS at the high end of our target in Q2.”
HP, however, led the landscape with a dominant share (estimated anywhere in between the 25 to 30 percent range by various estimates). In PC (including tablets) shipments, it grew its market share from 23.9 percent in the corresponding quarter last year to 25.6 percent in Jan-March 2023. But Lenovo and Dell were not far behind too: with about 15 percent and 12 percent shares respectively.
The slowdown came majorly due to piled-up inventory, a slump in consumer and commercial shipments, a dip in demand on the short-term horizon, and market saturation. The Indian traditional PC market continued the downward slope with a decline of 30.1 percent YoY in the first quarter of 2023 (January-March).
As for HP, in its Fiscal 2023 second-quarter results, it showed second-quarter net revenue of US$12.9 billion. This was down 21.7 percent from the prior-year period (down 18.0 percent in constant currency) from the prior-year period. In terms of personal systems (PS), net revenue was US$8.2 billion, again a decline (29 percent YoY) with a 5.4 percent operating margin. Consumer PS net revenue fell by 39 percent and Commercial PS net revenue tumbled 24 percent. Total units were down 28 percent, Consumer PS units were down 34 percent and Commercial PS units were down 23 percent.
Printing net revenue was US$4.7 billion, again a drop. It went down five percent YoY with a 19 percent operating margin. Consumer printing net revenue showed a drop of 19 percent but Commercial printing net revenue was up five percent. Supplies net revenue showed no signs of hope either—this was down four percent. Total hardware units were down percent overall, with Consumer Printing units sliding five percent and Commercial Printing units staying flat.
Amidst a bleak market scenario, there is a lot to work on—especially on what could change the market mood and prospects in a big way.
The company has rolled out some new offerings in its bid to pursue what’s coming next— especially in cloud printing, printing software lines, advanced gaming, 3D printing, and automation.
HP Indigo arm has expanded software solutions, with a focus on integrating software and data-driven tools into the print production floor. There is a new HP PrintOS Software Suite too. HP PrintOS is explained as a print production operating system with web and mobile applications that will help users obtain more from HP presses and printers while simplifying production.
HP also knows that businesses are moving towards faster, more flexible, more personalized, more resilient, and more sustainable production. To capture that tide, it has launched automation solutions and expanded materials, software, and services to help customers scale 3D printed parts production. Along with its industrial 3D printing hardware, HP is also putting its efforts in developing or partnering on innovative materials, software, services, and post-processing solutions. It is, apparently, working closely on materials development with partners like Arkema, BASF, Evonik, and Lubrizol.
What’s interesting to see is its portfolio of software products within its HP Digital Production Suite. The company is collaborating with other software providers to integrate Factory IT and Manufacturing Execution System (MES) solutions. New offerings like HP 3D Digital Sintering (AI-enhanced simulation of the sintering process) and HP 3D Process Development (that claims to democratize process development) are strong signs of the company’s deepening focus on the software side of the hardware game.
Among other things, Poly, an HP company, has started a strategic collaboration with Pexip to provide a suite of on-premises and cloud-based communications solutions (crafted especially for privacy-conscious customers, mainly those in the government, public, and private sectors).
On the gaming front, HyperX, the gaming peripherals team at HP Inc. recently brought out HyperX Cloud III Gaming Headset. The company also collaborated with Google for an affordable HP Chromebook offering.
The current forecasts on the Indian PC market (including tablets) also hint at a strong recovery – with a rebound growth of 11 percent in 2024 and 13 percent in 2025. If HP can fix the gaps on a stronger local manufacturing footprint just the way some smartphone OEMs did by setting up plants in India (and getting distribution, margin, and tax advantages too)—it would be a strong wave to surf when the tide is strong. The senior leaders have given enough signs of that in many media reports. There is a lot that can happen beyond what the Chennai Flex facility is delivering (primarily laptops, mini-towers, mini desktops, small form factors, and display monitors, so far).
The ‘water-cooler talk’ and the ‘printer talk’ on business is abuzz with these new bets. Would the company keep refilling ink on its old business model or go for a bold rip-and-replace gesture. 2023 could give a clear printout of that strategy.
By Pratima H