HP slips on disappointing outlook for ink supplies

Bloomberg

HP Inc.’s shares declined as much as 13 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 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.
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 January 31 “was disappointing bec- ause it would have been hi-gher” 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 first half of year, he added. Earnings excluding some items will be 50 cents a share to 53 cents a share in fiscal second quarter compared to analysts’ estimate of 52 cents, according to data compiled by Bloomberg.