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HP keeping an eye on print inventory levels

Vendor is having to juggle with some challenges in the commercial print market as a result of the coronavirus pandemic

HP is keeping a firm grip on channel inventory levels as it continues to react to coronavirus-sparked changes in the printing world.

Commercial print has been one of the victims of the pandemic, with offices shuttered and resellers unable to sell consumables or encourage hardware upgrades. The consumer market has been different, and shown growth with the shift to home working, but for the enterprise sector the past few months have been difficult.

The impact of Covid-19 can be seen in HP’s Q3 numbers with the supplier’s printing net revenues down by 20% year-on-year, and commercial hardware units down by 32%. But the figures also showed how the supplier was able to manage the shift in buying patterns to come out with a better-than-expected position in the print business, with consumer unit sales improving by 3%.

HP president and CEO Enrique Lores told analysts in an earnings call that it had been able to navigate the changes of the past few months: “The shift to remote work and learning drove an uptick in home printing. We saw an increase of Ink usage versus our original target. And we saw a strong growth in HP's smart app users with mobile downloads up 70% year-over-year.”

He added that it had been able to expand its Instant Ink subscription business and was now on track to pass 8m subscribers by the end of its fiscal year.

“We are connecting our Instant Ink and managed print service systems to take advantage of the work-from-home trends. In Q3, we began rolling out the first phase of centralised billing for commercial employees, printing from home,” he said.

“In commercial printing, we did see some improvement as the quarter progressed. In Managed Print Services, July page volume was down roughly 25%, an improvement from April, where we saw a decline of roughly 40%. While there remains much uncertainty about the phasing and pace of recovery, this is an early indication of office usage heading in the right direction,” he added.

Tight grip on stocks

With offices closed and buying patterns changing, there has been an impact on some hardware segments, and Steve Fieler, chief financial officer at HP, said it had tried to keep a tight grip on stocks in the channel.

“Overall in Q3, the team remained disciplined in managing channel inventory, keeping Tier 1 channel inventory levels below the ceiling. In total, Q3 print revenue was $3.9bn, down 20% nominally and 19% in constant currency. And print operating margins were 12.2%, which included a full quarter impact of office closures in the commercial print and the corresponding volume declines. Operating profit dollars were $480n,” he said.

The firm is also committed to the PC business, and on that front it saw increases thanks to the pandemic.

“We continue to advance our leadership in personal systems and print,” said Lores. “In personal systems we delivered growth in revenue, profit and share, and we delivered record unit shipments in Q3. The PC is more essential to daily life than ever, and PC use is up more than 20% since Covid emerged.”

In terms of the overall numbers for the third quarter, it showed net revenue of $14.3bn, which was down 2.1% from the prior-year period.

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