HP Reports Declining Revenue on Supply-Chain Disruptions

Date: Friday, May 29, 2020
Source: Yahoo Finance

(Bloomberg) -- HP Inc. reported declining quarterly sales, signaling the coronavirus pandemic has disrupted the supply chain of the world’s second-largest personal computer maker. Shares declined about 5.5% in extended trading.

Revenue fell 11% to $12.5 billion in the period ended April 30, the Palo Alto, California-based company said Wednesday in a statement. Analysts, on average, estimated $12.9 billion, according to data compiled by Bloomberg. HP projected profit, excluding some expenses, of 39 cents to 45 cents a share in the current quarter, falling short of analysts estimates of 46 cents.

HP will delay its splashy $15 billion buyback plan until the “market stabilizes,” Chief Financial Officer Steve Fieler said on a conference call after the results. The company will provide an update on the repurchases some time in the current quarter, he said.

The buybacks were part of a $16 billion program to return more money to shareholders. The company adopted the proposal to dissuade investors from supporting a hostile takeover bid by rival Xerox Holdings Corp., which eventually dropped its effort March 31, citing economic uncertainty caused by the pandemic. HP Chief Executive Officer Enrique Lores has sought to shore up the print division he once ran because of its traditional role fueling the company’s profitability.

HP reported fiscal second-quarter profit, excluding some expenses, of 51 cents per share, exceeding analysts’ projections of 42 cents.

“Driven by supply-chain disruptions, we saw an impact in several of our businesses,” Lores said in an interview. “They started in China, then they evolved into Southeast Asia. But we are back at full capacity.”

Executives cautioned that the printing division would post worse results in the current period ending in July than in the previous quarter, but revenue should improve over the course of the period. The company said it is ahead of its target to cut $1.2 billion of expenses by 2022, including by trimming employees’ salaries. HP expects to spend more money on the supply chain and logistics efforts in the current period, executives said on the call.

The stock dropped to a low of $16.12 in extended trading after closing at $17.12 in New York. Shares have declined 17% this year.

Revenue from personal computers and related systems decreased 7% to $8.3 billion in the period, with declines across laptops, desktops and workstations. Laptop demand held up the best due to more people buying computers to work and learn from home.

Sales in the printing division fell 19% to $4.15 billion, with ink supplies dropping 15%. Consumer hardware revenue declined 16% and commercial devices decreased 31%.

 

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