Overview: Hewlett-Packard's 3Q14 earnings and strategies (Part 6 of 14)
Improved PC sales contribute to HP’s growth
In the personal computer (or PC) space, Hewlett-Packard (or HP) (HPQ) doesn’t need an introduction. For the first time since 2011, there was an increase in PC sales by 12% in 3Q14. The increase was instrumental for revenue growth, even though it was nominal at 1%. Personal systems—including notebooks, desktops, and workstations—account for ~30% of HP’s revenues. HP’s huge investments in new generation laptop PC’s have paid off. This is evident in HP’s increased sales. Laptop sales have been healthier in 2013–2014. This explains the increase in share price for HP, Dell, Lenovo, and Intel (INTC).
Any positive news about HP’s PC shipments will likely benefit the NASDAQ Technology Dividend Index Fund (TDIV) and the LargeCap Value Fund (EZY).
The above chart shows the PC shipments’ quarter-over-quarter figures.
Increased shipment sales pushed PC division growth
HP reported 13% growth in total units shipped during 3Q14—owing to an 18% increase in notebook and a 6% increase in desktop shipments. Also, commercial and consumer revenues were up 14% and 8%, respectively. As a result, the company reported 12% year-over-year (or YoY) growth in revenues to $8.6 billion. HP’s products like the EliteBook Series and x360 convertible notebook have been popular. Also, the ageing installed base needs to be updated.
Windows XP expiration prompted PCs to be refreshed
Microsoft (MSFT) Windows XP expired in April 2014. It fueled a refresh cycle in the PC market. It’s estimated that many commercial markets have refreshed to a modern operating system (or OS) from Windows XP. However, it can’t be ruled out that many consumers held onto XP. This delay will likely push the refresh cycle into 2015 as well.
Clients are looking to refresh their aging installed bases. This is a good sign for HP’s business in the future.
Browse this series on Market Realist:
- Part 1 - Must-know: Hewlett-Packard’s 3Q14 earnings
- Part 2 - HP’s multi-year restructuring plan focuses on “new style of IT”
- Part 3 - Why HP expects 3D printing to drive its growth
- Information Technology