HP projects profit in line with analysts’ estimates

A man walks past the Hewlett Packard logo at its French headquarters in Issy le Moulineaux. (Reuters pic)

SAN FRANCISCO: HP Inc., the world’s largest personal-computer maker, projected earnings in line with analysts’ expectations, as it works to offset thin profit margins in its main business by cutting costs.

Profit excluding some items will be 52 cents a share to 55 cents a share in the current quarter, the Palo Alto, California-based company said Thursday in a statement. Analysts on average projected 53 cents, according to data compiled by Bloomberg. HP also raised its fiscal 2018 adjusted profit outlook to a range of US$2.00 to US$2.03 a share. Analysts estimated US$2 a share.

Chief Executive Officer Dion Weisler has been working to increase HP’s sales and profits in a stagnant, low-margin industry after its separation from Hewlett Packard Enterprise Co. One major component was the decision to cut as many as 5,000 workers by 2019, reducing expenses in the company’s restructuring. HP also rejuvenated its product lineup and has sought new sales models in an effort to bolster revenue. The company’s higher-end devices have helped HP steal market share from rivals, resulting in its dominant position in the personal-computer industry.

HP reported sales jumped 12% to US$14.6 billion in the period ended July 31, bringing its streak of growth to seven quarters. HP shares declined about 1% in extended trading after closing at US$24.63 in New York. The stock has gained 17% this year.

“We’ve done the hard work of taking cost out of the business while accelerating,” Weisler said in an interview. “Almost one in four machines around the world have an HP logo on it. That means there are three of four computers I can still go after.”

HP also projected full-year cash flow of US$3.7 billion. Pricier PCs for gamers and businesses have resonated with buyers and boosted prices. The company has also sought new delivery models to increase profits.

While HP has made it to the top of the heap in the computer industry, it must look elsewhere for profit. The operating margin of the company’s Personal Systems division, which includes PCs, was only 3.9% in the fiscal third quarter. The printing division, however, notched a 16% margin, with ink sales and services contributing to the profit.

The company has sought new ways to provide services to customers as it seeks larger revenue streams. Within the printing business, HP has been pitching its managed services programs to corporate customers — to perform maintenance on products including office copy machines. The company also has an ink delivery service. Finally, HP has a device-as-a-service business that allows businesses of all sizes to rent, rather than buy, computers, which gives HP more recurring revenue.