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HP Inc grows business, but price hike hits commercial PC division

Company reports strong growth for the third quarter 2017, but price increases have hit commercial sales, and a PC price cut may be on the cards

HP Inc has report growth in its PC and printers business, both from business sales and consumers, but its commercial PC business has suffered because of price hikes.

In its results for the third quarter of 2017, the company reported personal systems net revenue up 12% year on year (up 13% in constant currency), with a 3.7% operating margin.

Commercial net revenue increased by 11% and consumer net revenue was up 14%.

HP Inc said its notebook net sales increased to $5bn from $4.3bn in 2016, an 11% rise, while desktops grew by 8% from $2.5bn in 2016 to $2.6bn this year.

Printing net revenue was up 6% year on year (up 7% in constant currency), with a 17.3% operating margin.

The company said total hardware units were up 1% with commercial hardware units showing flat growth, while its consumer printer hardware business grew by 1%. HP’s supplies business reported net revenue growth of 10% (up 10% in constant currency), growing to $3.12bn from $2.84bn in 2016.

Overall, HP Inc reported third-quarter net revenue of $13.1bn, up 10%.

In a transcript of the earnings call posted on the Seeking Alpha financial blogging site, CEO Dion Weisler said: “The top four players, including us, in aggregate, grew 1%. And we grew a five-point premium to that. So the big are getting bigger and we are growing much faster than the big four in total.

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“And that’s really off the back of innovation. That’s what we’re focused on, delighting our customers and surprising them and amazing them with our products. And I think we have the best product line we’ve ever had, and that’s picked up quite regularly now by third-party reviewers that look at our products relative to our competitors.”

HP’s commercial PC business was affected by price increases. Margins have been pressured by industry-wide rises in component costs and currency headwinds, said CFO Cathie Lesjak. Responding to a question on the increase, Lesjak said: “In terms of price sensitivity, we see the greatest impact in the commercial space.”

Commenting on the strength of the US dollar, which contributed to the increase, Lesjak added: “We’ve now seen in fiscal 2017 pretty significant price increases. And so, if there is a tailwind from currency in 2018, our expectation is that prices are going to have to come down pretty significantly to relieve some of the pressure that’s building because we’ve been increasing prices this year.”

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