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HP Shares Slip After Disappointing Sales Growth

Nico Grant
HP Shares Slip After Disappointing Sales Growth

(Bloomberg) -- HP Inc.’s shares declined as much as 17 percent after the company warned that sales for its high-margin printer supplies business would fall for the rest of the year, presenting a setback for its effort to boost profitability.

HP printer supplies revenue will decline 3 percent for the rest of 2019, driven by weaker demand in Europe, the Middle East and Africa, executives said Wednesday during a conference call with analysts. Earlier, the world’s second-largest personal computer maker reported sales of $14.7 billion in the holiday quarter, missing Wall Street’s projection of $14.9 billion because of component shortages.

Ink supplies provide about twice the revenue of actual printer sales for HP, and help fuel the printing division’s 16 percent profit margin. Demand fell due to pricing and more sales on the internet, where HP has lower market share than in stores, executives said.

Key Insights

HP lost its PC sales crown last year to Lenovo Group Ltd., but Chief Executive Officer Dion Weisler has focused on making HP more profitable, in part by selling higher-end devices and putting more emphasis on subscription offerings. The company’s PC division notched its highest profit margin since 2012 in the fiscal first quarter, said Chief Financial Officer Steve Fieler.The revenue gain of 1.3 percent in the period ended Jan. 31 “was disappointing because it would have been higher” if there weren’t component shortages restraining supply, Weisler said in an interview. The shortages from chipmaker Intel Corp. will be an issue for HP’s supply through the first half of the year, he added. Earnings excluding some items will be 50 cents a share to 53 cents a share in the fiscal second quarter compared to analysts’ estimate of 52 cents, according to data compiled by Bloomberg.

Market Reaction

HP shares fell the most in more than seven years to $19.82. The stock had gained 17 percent this year through the close on Wednesday.

Know More

For more details on the results, click here.Read the statement here.

(Updates with share trading.)

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Alistair Barr

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