HP CEO Enrique Lores joins Yahoo Finance’s Alexis Christoforous and Brian Sozzi to discuss how HP is faring amid the coronavirus outbreak and what it is doing to support the U.S. front liners.
BRIAN SOZZI: Let's bring in the CEO of HP, Enrique Lores. Enrique, always good to talk to you. Appreciate you giving us a few minutes.
ENRIQUE LORES: Thank you. Good morning.
BRIAN SOZZI: So earlier in the week, HP stepped up-- and hat tip to you guys here-- making 3D-- using 3D printing to make face masks, face shields, and other parts to help the coronavirus relief effort. But how did those impacts or how did those efforts impact the core business of HP making printers and notebooks?
ENRIQUE LORES: Actually, what we wanted to show were that with the capabilities that we had with 3D printing, we can help doctors and other medical professionals to really assist through this operation. And this is really what we are doing by enabling designs and also production of these parts.
Well, now our core business, what we are seeing is actually very strong momentum in those areas that's related to working from home, studying from homes. What we have seen a very strong demand of PC printers. Because companies have realized that they needed to enable their workers to work from home, and this is what we have been focused on.
ALEXIS CHRISTOFOROUS: Enrique, Alexis here. Thanks so much for joining us. I know that most of your products are made in China. It appears as though China has come out the other side of this pandemic now. Back in February, you were saying that Q2, that the COVID-19 would have an impact on Q2 earnings of about $0.08 per share. Has that changed at all now? What are things looking like for Q2 and as much clarity as you can give us for the rest of the year, Enrique?
ENRIQUE LORES: Yeah, at this point, we are not changing our guidance. We explained in Q2 that this quarter was going to be really driven by our ability to manufacture our products. We had a plan early February, and we are meeting the plan that we built at that point. And as you are saying, we are seeing all our factories ramping up in China. We are very close to be at full capacity. We will be at full capacity next quarter. And really, we have seen a lot of very good progress in our production capabilities.
BRIAN SOZZI: Enrique, we just talked a couple weeks ago. HP has put forward a very aggressive and strong new capital allocation plan. Any changes to that? I believe it was a $15 billion buyback from fiscal year '20 to fiscal year '22. Any changes of that or to that in light of what's going on with the coronavirus globally?
ENRIQUE LORES: At HP, we put this plan because HP has a very strong balance sheet. And one of the key principles of value creation is to return capital to our shareholders. And this has not changed. What we need to evaluate now is based on the current economic and financial equation, what will be the specific timing and the specific actions we will be taking, but the principles of the plan have not changed.
BRIAN SOZZI: Enrique, on a personal level, your sister and younger brother are in Spain, both medical doctors. Have you been talking with them? And first and foremost, I hope they're safe and sound.
ENRIQUE LORES: Yeah, thank you. Yes, they are safe and sound. I talk to them regularly to understand what is the situation they are facing. And it's actually a very hard situation. The number of patients going every day is very high. And they really are dedicating many, many hours to this situation, as many of the doctors all over the world.
And this is why we decided that any help that we could provide with 3D printing, making sure that we provide equipment to doctors and nurses in hospital, needed to be a key priority for us. But I have to tell you that both HP employees, but also our partners have jumped into the opportunity of making these contributions. It's really showing how people really [INAUDIBLE] when there is a challenge, and it's really, really very rewarding to see what is happening.
ALEXIS CHRISTOFOROUS: Enrique, I'm very happy to hear that your family is staying safe. You know, just yesterday, I learned that our own Brian Sozzi has a sister in the health care industry. She is a nurse. My sister also a nurse. So you know, our hats off to those heroes, really, the people who are on the frontlines of this pandemic.
Before we let you go, I'd love the status on what's happening with HP and Xerox right now. Before all of this started, we know that Xerox was very aggressive in wanting to merge with your company. Are they going forward with a tender offer and a change in the slate of boards of director, even amidst this pandemic?
ENRIQUE LORES: Yeah, we make this to a very public statement about that-- about this. We communicated a few weeks ago that we thought their offer on that initiative was not in the best interests of HP shareholders. And the current situation has made that even more clear. The capital structure they're proposing would have disastrous consequences for the merged company.
And given the current situation, what we need to focus is in managing our company, helping our employees, helping our partners, and this is what we're doing. As far as we know, the tender is still in place, but our priority is going to be to manage our company because this is really what we think will create more value for our shareholders at this point.
BRIAN SOZZI: You know, Enrique, a very key point there, what would it be like to try to merge these two companies in this type of environment? It doesn't make any sense.
ENRIQUE LORES: I mean, you said that this is what we also believe both because of the capital structure that this will create, but also because of the focus that we will be losing in driving that integration, [INAUDIBLE] really managing our companies in this challenging situation.
ALEXIS CHRISTOFOROUS: All right, Enrique Lores, CEO of HP, thank you so much for being with us and stay safe.
ENRIQUE LORES: Thank you.